Question:
Question: GST - Exports
We are a GST registered company as is our customer. We provide positioning services to our customers.A particular customer claims that the services provided are used in Papua New Guinea instead of Australia. This company is a GST registered company in Australia. Is GST applicable or will it be considered as GST-free supplies?
Answer:
Recent changes are outlined below:
Under section 38-190 of the GST Act, a supply of services is GST-free if it is made to a non-resident who is not in Australia when the item is supplied, provided:
- The supply is neither a supply of work physically performed on goods situated in Australia when the work is done nor a supply directly connected with real property situated in Australia, or
- The non resident acquires the thing in carrying on the non resident’s enterprise but is not registered or required to be registered.
If your customer is GST registered, it must be carrying on an enterprise in Australia and hence is not a non-resident and is likely to be in Australia when you do the work.
There is another GST exemption if you supply services to a customer:
- Who is not in Australia when the work is done; and
- The effective use or enjoyment of the services takes place overseas; provided
- The work was not on goods situated in Australia nor directly connected with Australian real property.
There is a third exemption where the services are directly connected with goods or land situated overseas. This exemption might be applicable depending on the work that you do.
It would seem that GST-free status may or may not be applicable in this case. Is this of any consequence? If your customer is GST registered it may be able to claim an input tax credit on GST paid for these services. Hence, it is not out of pocket.
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