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  • Who charges GST

    For imported services and digital products, the business that may need to register for, and charge GST is:

    • the merchant who sells imported services or digital products to Australian consumers, or
    • an operator of an electronic distribution platform (EDP) or online marketplace, such as an app store that supplies imported services or digital products to Australian consumers.

    However, only one entity is liable for the GST on a taxable sale. If an EDP operator is responsible for GST on a sale, the merchant will not be responsible for GST.

    Find out about:

    Merchants

    An overseas merchant who sells digital services or digital products is generally:

    • responsible for GST on the sales it makes directly to Australian consumers, and
    • not responsible for GST for these sales it makes to Australian consumers through an EDP.

    An Australian based merchant who sells digital services or digital products is responsible for GST on the sales it makes:

    • directly to purchasers, and
    • through an EDP (unless they enter into an agreement to assign the responsibility to the EDP).

    A merchant that supplies imported services that are not digital supplies (such as legal services or architectural services) will always be responsible for any GST due on the supplies it makes to Australian consumers.

    If you sell the imported services or digital products directly (for example, through your own website) and you are registered or required to be registered for GST, you should charge GST on these sales unless they are not subject to GST under Australian law (known as GST-free or input taxed sales).

    The GST on your taxable sale will be 1/11th of the price the Australian consumer pays.

    Example

    Electronics Co is a merchant in China that sells digital products to Australian consumers. It meets the A$75,000 threshold to register for GST in Australia.

    On 1 July 2017, Matt, an Australian consumer, buys a digital product from Electronics Co. On its website, Electronics Co displays a price including GST when it becomes aware that GST will apply.

    Electronics Co charges Matt A$110. It includes GST of A$10 on the sale to the ATO in its GST return.

    End of example

    Merchants selling through an electronic distribution platform

    If you sell digital services or digital products to Australian consumers through an EDP, the EDP operator (instead of you) will generally be responsible for GST payable on these sales. If the EDP operator is responsible for GST, these sales do not count towards your GST turnover when deciding if you need to register.

    An EDP is a service that allows you to make sales of digital services or digital products available to purchasers, and the service is delivered by electronic communication. An example is an App store.

    A service that only advertises your products (for example, providing a link for customers to buy digital products from your website) is not an EDP. You will be responsible for GST on these sales.

    If GST already applies to your sales under existing rules (i.e. you are an Australian-based merchant registered for GST selling digital services or digital products), then you will continue to be responsible for GST on these sales, instead of the EDP operator.

    However, if you are an Australian-based merchant selling digital services or digital products through an EDP, you and the EDP operator can agree that the EDP is responsible for GST on your sales.

    Example

    Taiyo designs an app and supplies it through an EDP. Taiyo operates his business in Australia and is registered for GST.

    Taiyo’s supply is not an imported service or digital product, as his business is wholly run in Australia.

    Therefore, Taiyo is responsible for GST on the supply of his app, unless he enters into an agreement with the EDP operator.

    End of example

    See also:

    Electronic distribution platform operators

    You operate an electronic distribution platform (EDP) if your service:

    • allows merchants to make sales of imported digital services or digital products available to customers, and
    • your service is delivered by electronic communication (for example, an app store or website).

    If a purchaser buys imported digital services or digital products from merchants through your website, you operate an EDP.

    However, a service is not an EDP:

    • if it only provides  
      • a carriage service (such as those operated by internet service providers and telecommunication companies)
      • access to a payment system or processing payments
    • for sales of ‘face-value’ vouchers (such as a gift voucher that can be used for a choice of items up to a particular monetary value) by merchants.

    If you only provide advertising that makes customers aware of products and links them to a merchant's website, you do not operate an EDP.

    If you operate a physical store, sales made at the store are not made through an EDP as this is not a service delivered by electronic communication.

    See also:

    EDP operator responsible for GST

    If you operate an EDP, you will generally be responsible for GST on a sale of an imported digital service or digital product to an Australian consumer by a merchant based outside Australia that is made through your platform.

    If as an EDP operator you are responsible for the GST, the merchant is not responsible for any GST payable on the sale.

    Example

    Pacific Trends operates an app store that allows Australian consumers to buy digital products from merchants.

    Pacific Trends is registered for GST in Australia.

    Eleanor uses Pacific Trends' website to buy a digital product from Electronics Co, a merchant in China, for A$77 including GST. Pacific Trends determines that it is responsible for GST on the sales of digital products made to Eleanor as the merchant is outside Australia.

    Pacific Trends is treated as the supplier for GST purposes. It returns GST of A$7 on the sale to the ATO in its GST return.

    As Pacific Trends is treated as the supplier for GST purposes, Electronics Co does not:

    • return GST to the ATO on the sale, or
    • count the sale when determining if it is required to register.
    End of example

    An EDP operator can agree to be responsible for GST on supplies by an Australian-based merchant made through its platform, if the:

    • supplies are of digital products or digital services and are made electronically,
    • EDP operator enters into a written agreement with the merchant before the supply is made, and
    • EDP operator is registered for GST.

    EDP operator not responsible for GST

    The EDP is not responsible for GST on sales of digital products or digital services that are wholly done in Australia or made wholly through an Australian-based merchant. However, as discussed above, an EDP and Australian-based merchant may agree for the EDP to be responsible for the GST on any taxable sales.

    Additionally, a merchant (instead of the EDP operator) is responsible for GST, if all of the following apply:

    • a document is issued to the purchaser that identifies both the supply and the merchant (not the EDP operator) as the provider of the supply
    • the merchant and the EDP operator have agreed in writing that the merchant is the entity responsible for paying GST for the supply, or for a class of supplies that includes the supply concerned, and
    • the EDP operator does not control the key elements of the supply, as they do not do any of these  
      • authorise the charge to the recipient for the supply
      • authorise the delivery of the supply, and
      • set the terms and conditions under which the sale is made.

    There are also rules to ensure that if a sale is made through multiple EDPs, only one EDP operator will be responsible for GST.

    See also:

    Last modified: 13 Mar 2018QC 53379