Edited version of private advice

Authorisation Number: 1052225640559

Date of advice: 8 March 2024

Ruling

Subject: GST - importation of coins

Question 1

Is the importation of coins which were exported for grading service, considered as a non-taxable importation under section 42-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when they are returned to Australia in an unaltered condition?

Answer

Yes, the importation of coins into Australia in an unaltered condition after the grading service is a non-taxable importation under section 42-10 of the GST Act.

However, coins exported for the restoration service will be a taxable importation under section 13-5 of the GST Act when they are imported into to Australia.

Question 2

Will subsection 117-5(1) of the GST Act apply to the value of the taxable importation of coins that were exported for the restoration service and imported back into Australia?

Answer

Yes, subsection 117-5(1) of the GST Act applies to the value of the taxable importation of coins that were exported for restoration service and imported back into Australia. The value of the taxable importation would be the sum of:

•        the cost of the materials, labour and other charges involved in the restoration service (as determined by the Comptroller-General of Customs);

•        the international transport of the coins to their place of consignment in Australia;

•        insurance for the transport of the coins; and

•        any customs duty payable in respect of the importation of the coins.

Relevant facts and circumstances

You carry on an enterprise of buying and selling of XXX coins and you are registered for Goods and Services Tax (GST).

You routinely ship batches of coins from Australia to a professional coin grading service company located outside of Australia for authentication and quality assessment.

The grading service company is not registered or required to be registered for GST.

You retain ownership of the coins throughout the entire process. Ownership of the coins does not pass to the grading service company at any point in time.

You are listed as the 'importer' of all coins returned to Australia.

Under the grading service, the grading service company does not physically change the coins condition/character in any way. They only authenticate the value of the coin. The grading service company will then place the coin in a tamper-evident, sonically sealed acrylic plastic casing. You are charged with a fee for this service.

The non-resident entity also offers a restoration service that is separate from the grading service. Nearly all of the coins you handle do not require the restoration service. Restoration is generally only required when a coin has been poorly stored.

Restoration is different from cleaning in that it only 'removes any excess material that may be on the surfaces of a coin. This can include removing unattractive toning, lightening or eliminating spots and removing haze from the surface of the coin.

There is no restoration process for a coin that has been cleaned. Cleaned coins should not be submitted for restoration. The coin will be reviewed and returned unchanged, and the customer will be charged an evaluation fee.

You ordinarily acquire the coins from collectors. You also buy coins from family members of deceased collectors or from numismatic auctions within Australia or from the general public. The supply of the coins by these suppliers to you is a taxable supply in respect of which GST was paid.

You also purchase coins and currency notes from auctions outside Australia. This does not occur often, but when it does these items are imported as a taxable importation in respect of which GST was paid.

You acquired all the coins by way of acquisition or importation after 1 July 2000.

You were not entitled to, and did not claim, a payment related to the export of the coins from Australia, under the Tourist Refund Scheme (TRS).

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 section 42-10

A New Tax System (Goods and Services Tax) Act 1999 section 117-5

Reasons for decision

Taxable importation

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

a)    goods are imported; and

b)    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.

Goods and Services Tax Ruling; Goods and services tax: importation of goods into Australia (GSTR 2003/15) provides guidance on the operation of the provisions in the GST Act which apply to the importation of goods into Australia.

Goods are typically imported into Australia when they are brought to Australia to be unloaded or landed here. 'imported' in this context has its ordinary meaning.

If you lodge an import entry in your name as the 'owner' of the goods, you enter the goods for home consumption within the meaning of the Customs Act and you are liable to pay GST on that importation, if the importation is a taxable importation.

You will import the coins into Australia from the Country A as the 'owner.' Therefore, both paragraphs (a) and (b) of section 13-5 of the GST Act are satisfied and your importation of the coins is a taxable importation unless the circumstances surrounding the importation make it a non-taxable importation.

Non-taxable importation

Under section 13-10 of the GST Act, an importation is a non-taxable importation if:

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

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

Part 3-2 of the GST Act, particularly section 42-5 of the GST Act, deals with importation of goods that are non-taxable importations in accordance with the Customs Tariff Act 1995. As the Customs Tariff Act 1995 is administered by Customs, it is a matter for Customs to determine if the importation is covered by items referred to in section 42-5 of the GST Act.

There are no provisions in the GST Act under which the supply of the coins would be GST-free or input taxed. Therefore, the importation of the coins is not a non-taxable importation under paragraph 13-10(b) of the GST Act as the importation would not have been a GST-free or input taxed supply if it had been a supply.

Section 42-10 of the GST Act provides that goods exported from Australia and returned to Australia in an unaltered condition, would be considered as non-taxable importation.

Under subsection 42-10(1) of the GST Act, an importation of goods is non-taxable if:

a)    the goods were exported from the indirect tax zone and are returned to the indirect tax zone, without having been subject to any treatment, industrial processing, repair, renovation, alteration or any other process since their export; and

b)    the importer was not entitled to, and did not claim, a payment under Division 168 (about the tourist refund scheme) related to the export of the goods; and

c)    the importer:

     i.        is the manufacturer of the goods; or

     ii.        has previously acquired the goods, and the supply by means of which the importer acquired the goods was a taxable supply (or would have been a taxable supply but for section 66-45); or

     iii.        has previously imported the goods, and the previous importation was a taxable importation in respect of which the GST was paid.

In order for the coin to be a non-taxable importation, you must satisfy all the paragraphs in subsection 42-10(1) of the GST Act.

You have acquired the coins in Australia as taxable supply to you and have paid GST. You also purchased coins from outside Australia and has paid GST when you import them as taxable importation and therefore paragraph 42-10(c) of the GST Act is satisfied. You also satisfy paragraph 42-10(b) of the GST Act as you were not entitled to, and did not claim, a payment under the Tourist Refund Scheme (TRS).

We will need to consider whether the coins are returned to Australia without having been subject to any treatment, industrial processing, repair, renovation, alteration or any other process since their export.

The meaning of 'repair, renovating, modifying or treating' is set out in Goods and Services Tax Ruling; Goods and services tax: supplies of goods and services in the repair, renovation, modification or treatment of goods from outside Australia whose destination is outside Australia (GSTR 2005/2).

Paragraphs 34 to 42 of GSTR 2005/2 state:

34. The ordinary meaning of 'repair' is 'to restore to a good or sound condition after decay or damage; mend'. Repairing includes replacing defective or worn parts or re-attaching parts that have become detached.

35. The ordinary meaning of 'renovate' is 'to make new or as if new again; restore to good condition; repair.' Renovation changes the character or enhances efficiency of function, while a repair merely restores the character or efficiency or function.

36. The ordinary meaning of 'modify' is 'to change somewhat the form or qualities of; alter somewhat'.

37. The ordinary meaning of 'treat' to subject to some agent or action to bring about a particular result, for example, to treat a substance with acid.' Processes such as cleaning, sterilising, waterproofing or rust proofing goods are examples of treating goods.

...

41. ... the terms 'treating' and 'renovating' are limited to processes of the same kind of nature as repairing and modifying, neither of which contemplates the creation of completely new or different goods.

42. Repair, renovation, modification or treatment is a process applied to existing goods which may involve some change in the nature, form or condition of the existing goods, the substance of which remains unchanged. That is, the essential or fundamental character of the goods is the same. The other goods retain their own identity.

These terms are taken to have their ordinary meaning as they are not defined in the GST Act. Under the grading service, the coins remain unaltered and retain their own identity. The sorting and display case would not be considered as a treatment, industrial process, repair, renovation or alteration. The sorting and display case are merely a consequence of the grading service provided by the non-resident entity. Therefore, coins which undergo only the grading service (and not any other additional services offered, for example restoration) will satisfy the requirements of subsection 42-10(1) of the GST Act and will be a non-taxable importation.

However, the small proportion of coins that are exported for the restoration service, will come within the definition of 'repair' as the aim is to restore the condition or character of the coins by removing unattractive toning, lightening or eliminating spots and removing haze. As such any coins that are subject to this service will not satisfy all the requirements of subsection 42-10(1) of the GST Act and will be a taxable importation under section 13-5 of the GST Act.

Question 2

Detailed reasoning

Subsection 117-5(1) of the GST Act states:

The value of a taxable importation of goods that were exported from the indirect tax zone for repair or renovation, or that are part of a batch repair process, is the sum of:

a)    the cost, as determined by the Comptroller-General of Customs, of materials, labour and other charges involved in the repair or renovation; and

b)    the amount paid or payable;

             i.        for the international transport of the goods to their place of consignment in the indirect tax zone; and

             ii.        to insure the goods for transport;

to the extent that the amount is not already included under paragraph (a); and

...

c)    any customs duty payable in respect of the importation of the goods.

Paragraph 274 to 282 of GSTR 2003/15 discusses the valuation of re-importations.

Paragraphs 275 and 276 of GSTR 2003/15 state:

275. However, for re-importations that are taxable importations, Division 117 provides a special rule for the valuation of the taxable importation. The special rule covers the re-importation of goods which have been exported to be repaired or renovated. It also covers the valuation of re-importations of live animals such as breeding stock.

276. When goods are exported from Australia for repair or renovation, or are exported as part of a batch repair process, then re-imported, GST applies to the cost of the materials, labour and other charges involved in the repair or renovation rather than the full customs value of the goods. This cost is as determined by the Comptroller-General of Customs. The amount paid or payable for the international transport of the goods to their place of consignment in Australia and the amount to insure the goods for that transport, together with the amount paid or payable for certain loading or handling and other services are also included in the value of the taxable importation, as well as any customs duty payable.

Coins exported for the restoration service will be returned to Australia subject to repair (refer to the response to Question 1). As such, subsection 117-5(1) of the GST Act will apply to determine the valuation of the taxable importation of these coins.

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