ATO Interpretative Decision

ATO ID 2002/695 (Withdrawn)

Goods and Services Tax

• The ATO view for this issue is covered in Goods and Services Tax Ruling GSTR 2003/15.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the entity, a business operator, making a taxable importation under subsection 13-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it re-imports machinery that was leased to an overseas entity, and the machinery was subject to repair while overseas?

Decision

Yes, the entity is making a taxable importation under subsection 13-5(1) of the GST, when it re-imports machinery that was leased to an overseas entity, and the machinery was subject to repair while overseas.

Facts

The entity is a business operator. The entity is an Australian resident.

The entity leases machinery to a non-resident. The machinery is exported by the entity for the non-resident's use overseas. The export of the machinery is a GST-free supply under section 38-187 of the GST Act. While overseas, the machinery is serviced and repaired by the non-resident.

The entity did not manufacture, acquire or import the machinery before 1 July 2000.

The entity re-imports the machinery into Australia at the expiration of the lease.

The machine is entered for home consumption within the meaning of the Customs Act 1901. The importation of machinery is not covered by any of the items in Schedule 4 to the Customs Tariff Act 1995.

The importation of machinery would not have been GST-free or input taxed if it had been a supply.

Reasons for Decision

Under subsection 13-5(1) of the GST Act, an entity makes a taxable importation if:

(a)

goods are imported; and

(b)

the entity enters the goods for home consumption within the meaning of the Customs Act.

However, an importation is not a taxable importation to the extent that it is a non-taxable importation.

The entity imports machinery, and the machinery is entered for home consumption within the meaning of the Customs Act. Therefore, the importation satisfies the positive limbs of subsection 13-5(1) of the GST Act.

Section 13-10 of the GST Act states that an importation is a non-taxable importation if:

(a)

it is non-taxable under Part 3-2 of the GST Act; or

(b)

it would have been a supply that was GST-free or input taxed if it had been a supply.

The first step is to determine whether the entity is making a non-taxable importation under Part 3-2 of the GST Act. There are 2 provisions in Part 3-2 of the GST Act that set out the importations that are non-taxable.

The first provision, section 42-5 of the GST Act, deems the importation of goods to be non-taxable if they are covered by certain items in Schedule 4 to the Customs Tariff Act. The goods imported by the entity are not covered by Schedule 4 to the Customs Tariff Act. Therefore, section 42-5 of the GST Act does not apply to the importation.

The second provision, section 42-10 of the GST Act, sets out when the importation of goods returned to Australia in an unaltered condition is non-taxable. As the entity did not manufacture, acquire or import the machinery before 1 July 2000, the relevant provision is subsection 42-10(1) of the GST Act. Under this subsection, an importation of goods is a non-taxable importation if, amongst other things, the goods are returned to Australia without being repaired. The goods imported by the entity are subject to repair while overseas. Therefore, they do not satisfy the requirements of this subsection.

Accordingly, there are no provisions in Part 3-2 of the GST Act that apply to the entity's re-importation of machinery. The entity is not making a non-taxable importation under paragraph 13-10(a) of the GST Act.

Paragraph 13-10(b) provides that the importation is a non-taxable importation if the importation would have been a supply that was GST-free or input taxed if it had been a supply. In this case, if the machinery had been supplied to the entity it would not have been GST-free or input taxed. It does not matter that the export of the machinery by the entity was a GST-free supply. Accordingly, the entity is not making a non-taxable importation under paragraph 13-10(b) of the GST Act.

The importation by the entity meets the positive limbs of subsection 13-5(1) of the GST Act. Furthermore, the importation is not a non-taxable importation under section 13-10 of the GST Act. Therefore, the entity is making a taxable importation under subsection 13-5(1) of the GST Act when it re-imports machinery that was leased to an overseas entity and the machinery was subject to repair while overseas.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   subsection 13-5(1)
   paragraph 13-10(a)
   paragraph 13-10(b)
   section 13-10
   Part 3-2
   section 42-5
   section 42-10
   subsection 42-10(1)
   section 38-187

Keywords
Goods and services tax
Imports
Non taxable importations
Taxable importations

Business Line:  GST

Date of publication:  11 July 2002

ISSN: 1445-2782