Edited version of private ruling

Authorisation Number: 1011742115376

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Ruling

Subject: GST and importation

Question 1

If you remit goods and services tax (GST) on the importation of products into Australia and sale of your products in Australia, will you be able to claim a full input tax credit on these supplies?

Answer

No. You are entitled to a full input tax credit on the importation of goods into Australia; however you are not entitled to an input tax credit for the GST paid on the sale of your products in Australia.

Question 2

How do you claim the input tax credits from the Australian Taxation Office (ATO) in respect of the GST paid on your importation of your products?

Answer

You claim input tax credits in your business activity statement (BAS).

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are registered for the GST

You manufacture your product outside Australia

You received a contract from an Australian entity to construct two products

You have imported one of the products into Australia

You will be importing the second product soon into Australia

Detailed reasoning

Importation into Australia

Section 13-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you make a taxable importation if:

· goods are imported; and

· you enter the goods for home consumption (within the meaning of the Customs Act 1901)

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

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

· it is a non-taxable importation under Part 3-2; or

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

A supply of goods is a taxable supply if all the requirements of section 9-5 of the GST Act are met. The requirements under section 9-5 of the GST Act are:

· you make a supply for consideration;

· the supply is made in the course or furtherance of an enterprise that you carry on;

· the supply is connected with Australia; and

· you are registered, or required to be registered for GST.

However, a supply that is GST-free or input taxed is not a taxable supply.

Consequently, the supply of your products is made for consideration, in the course of an enterprise that you carry on, you are registered for GST and when the products are imported into Australia, the supply is connected with Australia. Therefore, the importation of the products into Australia is a taxable importation for GST purposes.

However, section 15-5 of the GST Act specifies that you make a creditable importation if:

· you import goods solely or partly for a creditable purpose; and

· the importation is a taxable importation; and

· you are registered or required to be registered.

Section 15-15 of the GST Act specifies that you are entitled to an input tax credit for any creditable importation that you make.

Paragraphs 120 to 149 of Goods and Services Tax Ruling GSTR 2003/15 (GSTR 2003/15) clarify the meaning of 'you import goods'.

Paragraphs 120 to 122 state:

120. Section 15-15 [specified above] provides that 'you are entitled to the input tax credit for any creditable importation that you make' (italics added). The first part of paragraph 15-5(a) states that you make a creditable importation if 'you import goods' (italics added). To determine who is entitled to input tax credits for a creditable importation, it is necessary to identify the 'you'. That is, the entity that imports the goods.

121. Consistent with the meaning of import ….. 'you import goods' requires that you bring goods, or cause them to be brought, into Australia.

122. You bring goods into Australia by physically carrying or transporting the goods yourself. You cause goods to be brought to Australia by engaging, or instructing your agent to engage, another party such as a freight forwarder, international courier, or other transport provider, to bring those goods to Australia on your behalf. Alternatively, you may cause goods to be brought into Australia by simply requesting a foreign supplier to dispatch them to you in Australia.

Further paragraphs 124 and 125 state:

124. While there can be several entities involved in bringing goods or causing them to be brought into Australia, Division 15 clearly intends to identify one party only as the entity that imports the goods. This is because the Division contemplates only one entity having an entitlement to an input tax credit.

125 Paragraph 15-5(a) contemplates that the goods may be imported for a particular purpose, that is, a creditable purpose. Thus 'you import' connotes that, in importing the goods into Australia, you do so for your own purposes, such as application in your business, resale or retention of the goods for business or other purposes. This is to be distinguished from cases where the entity bringing the goods to Australia does so only for the purposes of another entity, such as where a freight forwarder brings goods to Australia for the purposes of its client.

Paragraph 120 of GSTR 2003/15 above recognises that 'you' need to be identified as the importer of the goods into Australia. Paragraphs 121 and 122 identify that 'you' as the entity that causes importation of the goods. Further, paragraph 125 identifies the purpose of the importation. Therefore, in this case you are the importer for the purposes of section 13-5 of the GST Act, because you import or cause the importation of your products.

In your case, the importation of the products into Australia is a taxable importation under section 13-5 of the GST Act. You import the products for a creditable purpose, the importation is a taxable importation and you are registered for GST. Therefore, section 15-15 of the GST Act entitles you to an input tax credit on the importation of the products into Australia.

Consequently, when you import your products into Australia you are entitled to a full input tax credit under section 15-5 of the GST Act.

Sale in Australia

As stated in the facts, once the products are imported into Australia you sell the products to recipient. The supply of your products is made for consideration, in the course of an enterprise that you carry on, you are registered for GST and the supply of the products is connected with Australia, as the sale of your products is in Australia. The supply of your products satisfies section 9-5 of the GST Act and the sale is a taxable supply.

Therefore, as specified under section 9-40 of the GST Act you must pay GST on any taxable supply that you make and you are required to remit GST to the ATO on the supply of your products in Australia to recipient.

2 Claiming input tax credits

To claim input tax credits you are required to lodge a BAS at the end of the tax period. You can access our publication GST for small business (NAT 3014) at: http://www.ato.gov.au/content/downloads/bus20724nat3014.pdf for an explanation and it will assist you in completing your BAS.

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