Edited version of your written advice

Authorisation Number: 1013053352578

Date of advice: 15 July 2016

Ruling

Subject: GST and supplies of goods that are brought to Australia

Question

Are you liable to pay goods and services tax (GST) when you invoice the customer for your supply of goods that are brought to Australia?

Advice

No, you are not liable to pay GST when you invoice the customer for your supply of goods that are brought to Australia because the supply of the goods is not connected with Australia under subsection 9-25(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) since you did not import the goods when they arrive in Australia. GST is therefore not applicable to the supply.

Relevant fact

You are registered for GST and you advised that you conduct your business activity as followed:

• A customer wants to buy a product or have a product designed/made for them.

• The customer places an order with you for the product and agrees to your terms and conditions when placing the order.

• You invoice the customer for the order. The cost of the product paid by the customer in the invoice includes your profit/expense.

• You contact an overseas factory (supplier) for the product ordered by the customer. You pay the product you ordered and receive a commercial invoice from the overseas supplier.

• When the product arrives in Australia a freight forwarding company clears the product from Customs and delivers the product to the customer. The customer is responsible to pay the custom duty and GST. The amount to be paid to Customs is calculated on the amount you invoice to the customer.

• The customer is also responsible for the freight forwarder and associated expenses, and it is most often a freight forwarder nominated by the customer who has previously engaged this freight forwarder.

• You do not install or assemble the product in Australia.

• The customer is not aware from which overseas supplier the product has been purchased. However, if the customer wishes to check the Bill of Lading and the packing list they receive, they will see the factory's details listed.

You do not import the goods on behalf of the Australian customers. You advised that you find the appropriate goods, inspect the appropriate goods and direct the overseas factory to the customer's freight forwarder.

The customer imports the goods and the customer's name is used on the import declaration.

All customers are based in Australia.

The customer contacts the freight forwarder and also shares with you the freight forwarder's details so the overseas factory can contact the freight forwarder directly. The Australian customer pays the freight forwarder, the factory gives the freight forwarder the commercial invoice, packing list, packing declaration and copy of the bill of lading.

You receive a copy of the Bill of lading for the goods in order to check the accuracy of the information detailed in the document before it is sent to the freight forwarder and the customer.

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 Subsection 9-25

Reasons for decision

GST is payable on a taxable supply. You make a taxable supply under section 9-5 of the GST Act 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.

Connected with Australia - subsection 9-25(3) of the GST Act

One of the requirements for a supply to be a taxable supply is the supply is connected with Australia.

From the information received you are making a supply of goods to your customers and these goods are brought to Australia. Relevant to your supply is subsection 9-25(3) of the GST Act.

Currently under subsection 9-25(3) of the GST Act, a supply of goods is connected with Australia if that supply involves the goods being brought to Australia and the supplier either:

a) imports the goods into Australia; or

b) installs or assembles the goods in Australia.

You advised that it is the customer who imports the goods into Australia, the customer's name is used on the import declaration and the customer is responsible to pay GST on the taxable importation of the goods. You also do not install or assemble the goods in Australia. In this instance your supply of goods that are brought to Australia is not connected with Australia as you do not satisfy the requirements in subsection 9-25(3) of the GST Act

Accordingly, your supply of goods to the customer is not a taxable supply under section 9-5 of the GST Act since paragraph 9-5(c) of the GST Act is not satisfied. You therefore will not be liable to pay GST on your supplies of goods.

For more information on when a supply is connected with Australia please refer to Goods and Services Tax Ruling GSTR 2000/31 which is available from the legal database of www.ato.gov.au

Amended subsection 9-25(3) of the GST Act

An amendment was recently made to subsection 9-25(3) of the GST Act and the amendment subsection 9-25(3) of the GST Act will apply from 1 October 2016.

The amended subsection 9-25(3) of the GST Act provides that a supply of goods that involves the goods being brought to Australia, the supply will be connected with Australia if the supplier imports the goods.

Since you are not importing the goods into Australia, your supply of goods to the customer will not be connected with Australia. Your supply of goods will not be a taxable supply under section 9-5 of the GST Act and you will not be liable to pay GST on the supply.

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