Edited version of your private ruling

Authorisation Number: 1012486638895

Ruling

Subject: GST and connected with Australia

Question

Are you making a taxable supply when you sell goods to an Australian-based customer who brings the goods to Australia and completes the Customs formalities?

Answer

No.

Relevant facts

You sell various products and are registered for GST.

During a particular period, you sold various products to an Australian-based customer.

Originally, your arrangement with the Australian-based customer was that you imported the products from Country X and then sold them to the Australian-based customer GST-inclusive.

From a certain date, the Australian-based customer advised that they wanted to do their own custom clearance and requested that you do not include GST on the sale. Under this new arrangement, you buy the products from the supplier in Country X and before the products arrive in Australia or before customs clearance, the products are sold to the Australian-based customer who then handles the customs clearance and pays GST on the importation based on the invoice that you issue to them.

You advised that you do not have any written arrangement with the Australian-based customer. They send you a purchase order and upon receipt of a deposit you place the order with your overseas supplier. The terms of the sale are Free on Board (FOB). The Australian-based customer is responsible for transporting the products to Australia and has appointed a logistics company to arrange the transport and importation.

You provided the following documents to clarify your arrangement with the Australian based customer:

· Purchase order xxx from the Australian-based customer listing the products required.

· Your Invoice 0000000xx referring to xxx listing the products to be shipped through the logistics company. The invoice totalling $XXXX shows nil GST.

· Australian Customs Entry for Home Consumption listing the owner as the Australian-based customer and the agent logistics company. The sale term is listed as FOB and the loading point listed as Country X, and the destination as an Australian capital city with the delivery address being the Australian-based customer's address in that capital city. The customs value of the products is listed as $XXXX. The Australian-based customer has deferred the payment of the GST on importation.

You originally recorded these sales in your activity statements as not subject to GST. However, your new accountant reviewed the arrangement and amended the activity statements reporting these sales as taxable.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5.

A New Tax System (Goods and Services Tax) Act 1999 Section 9-25.

A New Tax System (Goods and Services Tax) Act 1999 Subsection 9-25(1).

A New Tax System (Goods and Services Tax) Act 1999 Subsection 9-25(3).

A New Tax System (Goods and Services Tax) Act 1999 Section 13-5.

A New Tax System (Goods and Services Tax) Act 1999 Section 195-1.

Reasons for decision

Summary

The sale of goods to your Australian-based customer who brings the goods to Australia and completes the Customs formalities is not a taxable supply. Hence, you are not liable to pay GST on the sale of these goods.

Detailed reasoning

You are liable to pay the GST on any taxable supply that you make.

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) sets out the requirements of a taxable supply and it states:

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and

(c) the supply is *connected with Australia; and

(d) you are *registered, or *required to be registered for GST.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

(* denotes a term defined in section 195-1 of the GST Act.)

All of the requirements of section 9-5 of the GST Act must be satisfied for the sale of the goods to be a taxable supply.

You sell goods to an Australian-based customer who arranges for the goods to be transported and imported into Australia.

You are registered for GST and the sale of the goods to your Australian-based customer is made for consideration and in the course of an enterprise you carry on. Therefore, you satisfy the requirements of paragraphs 9-5(a), 9-5(b) and 9-5(d) of the GST Act. Furthermore, the sale of the goods in the circumstances described is neither GST-free nor input taxed.

It remains to be determined whether the supply of the goods is connected with Australia under paragraph 9-5(c) of the GST Act.

Supplies connected with Australia

Section 9-25 of the GST Act sets out the circumstances under which a supply is connected with Australia. In this case, of relevance are subsections 9-25(1) and 9-25(3) of the GST Act, which state:

Supplies of goods wholly within Australia

(1) A supply of goods is connected with Australia if the goods are delivered, or made available, in Australia to the recipient of the supply.

Supplies of goods to Australia

(3) A supply of goods that involves the goods being brought to Australia is connected with Australia if the supplier either:

(a) imports the goods into Australia; or

(b) installs or assembles the goods in Australia.

Goods and Services Tax Ruling GSTR 2000/31 explains when a supply is connected with Australia under section 9-25 of the GST Act and Goods and Services Tax Ruling GSTR 2003/15 provides an explanation on the importation of goods into Australia.

Supplies of goods wholly within Australia

Paragraphs 45 to 49 of GSTR 2000/31 cover the circumstances when a supply of goods is made wholly within Australia under subsection 9-25(1) of the GST Act.

Subsection 9-25(1) of the GST Act provides that a supply of goods is connected with Australia if the goods are 'delivered, or made available', in Australia to the recipient of the supply. The recipient, in relation to a supply, is the entity to which the supply is made.

In the context of subsection 9-25(1) of the GST Act, goods are delivered in Australia if the goods are physically delivered in Australia. Goods are made available in Australia if the goods are physically made available in Australia.

Goods which are delivered or made available in Australia to the recipient may be goods that the supplier has acquired domestically or imported.

Paragraph 49 of GSTR 2000/31 provides that where the recipient imports the goods into Australia, the supply of goods is not connected with Australia under subsection 9-25(1) because the goods are not delivered, or made available in Australia to the recipient of the supply.

In your case, the goods are delivered directly from your overseas supplier to your customer's address in Australia. The terms and conditions of the sale provide that your Australian-based customer is responsible for importing the goods into Australia. You do not physically receive or handle the goods yourself. As the goods are not imported by you as the supplier, subsection 9-25(1) of the GST Act is not satisfied because you do not actually deliver or make the goods available in Australia to the recipient of the supply, your Australian-based customer.

Supplies of goods to Australia

Paragraphs 52 to 56 of GSTR 2000/31 cover the situation when a supply of goods is brought to Australia under subsection 9-25(3) of the GST Act.

The ruling provides that a supply of goods is connected with Australia under subsection 9-25(3) of the GST Act if the supply involves those goods being brought to Australia and the supplier either imports the goods into Australia or installs or assembles the goods in Australia. The import of the goods into Australia or the installation or assembly of the goods in Australia is a supply of goods to Australia.

While subsection 9-25(3) of the GST Act applies to supplies that involve goods being brought to Australia, a connection with Australia only exists if the supplier either imports the goods into Australia or installs or assembles the goods in Australia.

Paragraph 72 of GSTR 2003/15 explains that supplies of goods to Australia are connected with Australia if the supplier imports the goods. A supplier imports goods where the supplier causes the goods to be brought to Australia for its own purposes and completes the customs formalities.

Paragraph 147 of GSTR 2003/15 provides that an entity completes the customs formalities where that entity's name appears on the import entry as 'owner'. This occurs where the entity completes the entry itself, or engages a customs broker.

In your case, the terms and conditions of the sale provide that your Australian-based customer is responsible for importing the goods into Australia. Your Australia-based customer is responsible for the completion of the customs entry formalities and is named as the owner of the imported goods. As you are not the importer of the goods and you do not install or assemble the goods in Australia, subsection 9-25(3) of the GST Act is not satisfied.

The sale of goods to your Australian-based customers is not connected with Australia under section 9-25 of the GST Act. As such, the requirement in paragraph 9-5(c) of the GST Act is not satisfied.

As not all the requirements of section 9-5 of the GST Act are satisfied the sale of goods which are delivered direct from your overseas supplier to your Australian-based customer is not a taxable supply. Hence, you are not liable to pay GST on this sale.

Correcting GST mistakes

Where you have made a GST mistake on an earlier activity statement, resulting in you paying too much GST or claiming too much GST credits, you may be able to make a correction on a subsequent activity statement if the net effect (that is the total GST effect of all the errors) is within the correction limits.

The guide Correcting GST errors explains how to correct GST errors you made on an earlier activity statement. In particular, it explains when you can correct GST errors on a later activity statement, in accordance with Goods and Services Tax: Correcting GST Errors Determination 2013 which took effect from 10 May 2013.

All publications referred to in this private ruling are available from the ATO website www.ato.gov.au

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