which it can make the necessary repairs, the goods will need to be either sent offshore to be repaired, or be repaired in the indirect tax zone on behalf of the manufacturer. If the non-resident manufacturer engages a GST registered entity in the indirect tax zone to undertake the repairs, then the repairer makes a taxable supply of repair services to the nonresident manufacturer. Provided the non-resident manufacturer is not in the indirect tax zone when the repair services are done, and if the warrantor acquires the services in carrying on its enterprise, the supply of the repair services can be GST free under item 2 in the table to subsection 38-190(1). However, the limitation to item 2 referred to above will apply in these circumstances because the repair services are provided to the entity that purchased the goods from the manufacturer. In these circumstances, the non-resident manufacturer will generally be entitled to ITCs for its acquisitions of the warranty services because those supplies are acquired in the course of carrying on its enterprise. However, to obtain these ITCs, the non-resident manufacturer will be required to register for GST and to lodge a business activity statement to claim the refund. Additionally, any replacement parts, including a full replacement of the goods that are supplied in accordance with the provision of a warranty, are not GST free if the goods remain within the indirect tax zone. Scope of amendments To prevent non-residents in these circumstances from being drawn into Australia’s GST system, these amendments ensure that a supply of a repair, renovation, modification or treatment of goods will be GST free if it is made to a non-resident that is not in the indirect tax. [Schedule 2, item 14, subsection 38-191(1)] In order for such supplies to be GST free: the non-resident recipient of the service must be neither registered nor required to be registered; the non-resident recipient must acquire the service supplied in carrying on its enterprise; the service must be done to meet the non-resident’s obligations under a warranty relating to the goods; and the warranty must have either been sold as part of a package with the supply of goods (such that the consideration for the warranty was included in the consideration for the supply of goods), or been a taxable supply separate from the supply of the goods.
which it can make the necessary repairs, the goods will need to be either sent offshore to be repaired, or be repaired in the indirect tax zone on behalf of the manufacturer. If the non-resident manufacturer engages a GST registered entity in the indirect tax zone to undertake the repairs, then the repairer makes a taxable supply of repair services to the nonresident manufacturer. Provided the non-resident manufacturer is not in the indirect tax zone when the repair services are done, and if the warrantor acquires the services in carrying on its enterprise, the supply of the repair services can be GST free under item 2 in the table to subsection 38-190(1). However, the limitation to item 2 referred to above will apply in these circumstances because the repair services are provided to the entity that purchased the goods from the manufacturer. In these circumstances, the non-resident manufacturer will generally be entitled to ITCs for its acquisitions of the warranty services because those supplies are acquired in the course of carrying on its enterprise. However, to obtain these ITCs, the non-resident manufacturer will be required to register for GST and to lodge a business activity statement to claim the refund. Additionally, any replacement parts, including a full replacement of the goods that are supplied in accordance with the provision of a warranty, are not GST free if the goods remain within the indirect tax zone. Scope of amendments To prevent non-residents in these circumstances from being drawn into Australia’s GST system, these amendments ensure that a supply of a repair, renovation, modification or treatment of goods will be GST free if it is made to a non-resident that is not in the indirect tax. [Schedule 2, item 14, subsection 38-191(1)] In order for such supplies to be GST free: the non-resident recipient of the service must be neither registered nor required to be registered; the non-resident recipient must acquire the service supplied in carrying on its enterprise; the service must be done to meet the non-resident’s obligations under a warranty relating to the goods; and the warranty must have either been sold as part of a package with the supply of goods (such that the consideration for the warranty was included in the consideration for the supply of goods), or been a taxable supply separate from the supply of the goods.
C2015-051_Explanatory-Material.docx