ATO Interpretative Decision
ATO ID 2004/819
Goods and Services Tax
GST and goods sold in Australia that were imported under a Tradex orderFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Does the entity, a manufacturer, have an increasing adjustment under section 141-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when goods that it manufactured from components it imported under a Tradex order are sold in Australia?
Decision
Yes, the entity does have an increasing adjustment under section 141-5 of the GST Act, when goods that it manufactured from components it imported under a Tradex order are sold in Australia.
Facts
The entity is a manufacturer who is registered for goods and services tax (GST).
The entity imported components under a Tradex order and is the holder of the Tradex order relating to those components. The entity's importation was a non-taxable importation under subsection 42-5(1) of the GST Act.
No other provision under Part 3-2 of the GST Act would have made the importation a non-taxable importation if it had not been covered by item 21A in Schedule 4 to the Customs Tariff Act 1995. If the importation of the components had been a supply to the entity it would not have been input taxed or GST-free.
The components are incorporated into goods that the entity manufactures. Most of the goods the entity manufactures are exported except for a small number which are sold in Australia.
The entity's sale of the goods in Australia falls within one of the circumstances referred to in subsection 21(1) of the Tradex Scheme Act 1999.
Reasons for Decision
The holder of a Tradex order has an increasing adjustment if goods relating to that order are dealt with contrary to the Tradex Scheme.
Specifically, section 141-5 of the GST Act provides that an entity has an increasing adjustment if:
- •
- the entity imported Tradex scheme goods
- •
- the entity is the holder of the Tradex order relating to the goods
- •
- the importation would have been a taxable importation if the goods had not been covered by item 21A of Schedule 4 to the Customs Tariff Act at the time of their entry for home consumption, and
- •
- any of the circumstances referred to in subsection 21(1) of the Tradex Scheme Act occur in respect of the goods.
As the entity imported components under a Tradex order and is the holder of the Tradex order relating to those components, the first two requirement of section 141-5 of the GST Act are satisfied.
Subsection 13-5(1) of the GST Act provides that an entity makes a taxable importation if goods are imported, and the goods are entered for home consumption (within the meaning of the Customs Act 1901).
However, section 13-10 of the GST Act provides that an importation is a non-taxable importation if:
- •
- it is a non-taxable importation under Part 3-2 of the GST Act, or
- •
- it would have been a supply that was GST-free or input taxed if it had been a supply.
No other provision under Part 3-2 of the GST Act would have made the importation a non-taxable importation had it not been covered by item 21A in Schedule 4 to the Customs Tariff Act. If the importation of the components had been a supply to the entity it would not have been input taxed or GST-free.
Therefore, the entity's importation would have been a taxable importation if the components had not been covered by item 21A of Schedule 4 to the Customs Tariff Act at the time of their entry for home consumption. As such, the third requirement of section 141-5 of the GST Act is satisfied.
The fourth requirement under section 141-5 of the GST Act is that any of the circumstances referred to in subsection 21(1) of the Tradex Scheme Act occur in respect of the goods. Where one of these circumstances occurs, the goods relating to the Tradex order are dealt with contrary to the Tradex Scheme.
As the entity's sale of the goods in Australia falls within one of the circumstances referred to in subsection 21(1) of the Tradex Scheme Act, the fourth requirement of section 141-5 of the GST Act is satisfied.
All the requirements under section 141-5 of the GST Act are satisfied and as such, the entity has an increasing adjustment for the components that it imported under a Tradex order when goods manufactured from those components are sold in Australia.
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
subsection 13-5(1)
section 13-10
Part 3-2
subsection 42-5(1)
section 141-5
subsection 141-5(2)
The Act Customs Tariff Act 1995
Schedule 4 item 21A Tradex Scheme Act 1999
subsection 21(1)
Keywords
Goods and services tax
GST imports
Customs concessions
Non-taxable importations
ISSN: 1445-2782