1 Is GST payable on services provided by you, to Clients located in Australia?
Yes, on the understanding that the work performed by the Consultants are not directly connected with goods or real property situated outside the indirect tax zone, GST is payable on services provided by you, to Clients located in Australia. Question 2 Is GST payable on services provided by you, to Clients located overseas? Answer No, GST is not payable on services provided by you, to Clients located overseas.
You carry on an enterprise of locating suitable workers (Consultants) for businesses/clients located Australia and overseas. You locate suitable consultants and refer them to businesses. The Consultants are not employees of the businesses. Nor are they your employees. However the obligation to pay the Consultants for their work rests with you. Your contract with your clients/businesses specifies that your services to them are offshore services of administrative services. You get paid by your clients/businesses. The Consultants will always be undertaking the work overseas and at no time will be coming to Australia to perform their work. Your non-resident clients will not be in Australia in any capacity in relation to the supply of your services. In relation to non-resident clients/businesses, you enter into a contract directly with the clients and do not contract with any other party in Australia. You are not a labour hire firm.
Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 Section 38-190 of the A New Tax System (Goods and Services Tax) Act 1999
GST is payable on taxable supplies. A taxable supply is defined in section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 as follows: You make a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) if: (a) you make the supply for consideration; and (b) the supply is made in the course or furtherance of an enterprise you carry on; and (c) the supply is connected with the indirect tax zone; and (d) you are registered or required to be registered. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed, Your supply of services to the Clients meets the requirements mentioned in paragraphs 9-5(a) - 95(d) of the GST Act for the following reasons: (a) You make the supply of recommending a suitable consultant to the client for a fee. (b) This supply is made in the course of your enterprise. (c) The supply is connected with the indirect tax zone as you are based in Australia and conduct your enterprise in Australia. The fact that the Consultants are based overseas does not change the fact that the supply is connected with the Indirect Tax Zone. (d) You are registered for GST.
The issue here is determining whether the supply is GST-free under any of the GST-free provisions of the GST Act. The relevant provisions to consider are items 1, 2 and 3 in the table in sub-section 38-190(1). Given that you deal with two types of clients (i.e.: those who are based in Australia and those who are not based in Australia), it is necessary to analyse these separately. Supplies made to Australian clients The relevant item in the table in subsection 38-190(1) of the GST Act to consider for this scenario is item 1. Under this item, a supply that is directly connected with goods or real property situated outside the indirect tax zone is GST-free. Where the work performed by the consultants (based overseas) can be said to be work directly connected with goods or real property situated outside the indirect tax zone, then these supplies will be GST-free. The Commissioner's views in relation to what is a supply 'directly connected with goods or real property situation outside the indirect tax zone' is provided in goods and services tax ruling GSTR 2003/7 (copy enclosed).
It is our understanding that the work performed by the Consultants are currently administrative work that are not directly connected with goods or real property situated outside the indirect tax zone. Tasks performed by the consultants that are not 'directly connected with goods or real property situated outside the indirect tax zone' will not come within any of the items in the table in subsection 38-190(1) of the GST Act. These services do not come within any of the other GST-free provisions or input taxed provisions of the GST Act either. Accordingly, services supplied to Australian clients are taxable supplies. Supplies made to clients based overseas Supplies made to your non-resident clients who will not be in Australia in any capacity in relation to the supply of your services, come under either item 2 and/or 3 in the table in subsection 38-190(1) of the GST Act. Accordingly, these supplies are GST-free. Sub-section 38-190(3) of the GST Act does not apply. Therefore, supplies made to clients based overseas are not taxable supplies and as such GST is not payable.