Edited version of private advice

Authorisation Number: 1052241469421

Date of advice: 24 April 2024

Ruling

Subject: GST on importation of goods

Question

Is the Entity making a creditable importation under section 15-5 of the A New Tax System (Goods and Services Tax) Act 1999 when it imports the goods?

Answer

Yes, the Entity is making a creditable importation.

This ruling applies for the following periods

Any tax periods ending on or after 1 July 2023

The scheme commences on:

1 July 2023

Relevant facts and circumstances

The facts and circumstances include those included in the Collaboration Agreement and associated documents.

1.    The Entity provides a range of aerospace maintenance, repair, and overhaul (MRO) services.

2.    The Entity has been registered for GST since (date, month, year).

3.    On (date, month, year), the Entity entered into an agreement with the Licensor, a company incorporated in (country) whereby the Entity will provide services as subcontractor to the Licensor. The services are specifically in relation to goods.

4.    The nature of the goods results in the goods being replaced when they need the services. Spare goods are required to be available to replace the ones in need of the services.

5.    The Entity imports and maintains the local store of goods in Australia. The Entity is responsible for the initial inspection upon receipt of the goods as well as warehousing / storage, insurance, and general management of the goods.

6.    Goods that are in need of the services are removed from the equipment and replaced with a fully functioning unit. The Entity will then perform the services on the goods and place it into storage ready for use. The Entity does not own the goods and is not involved in the installation of the goods on the equipment.

7.    The Entity has imported several goods that are in bonded storage and will be entered for home consumption in the future.

8.    The goods that are being imported are fully operational and require no physical maintenance or repair by the Entity. These are known as 'rotatable spares'.

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 15-5

A New Tax System (Goods and Services Tax) Act 1999 section 15-10

A New Tax System (Goods and Services Tax) Act 1999 section 15-15

Reasons for decision

Under section 15-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), there are three requirements that must be satisfied for an importation to be a creditable importation.

The section provides that an entity makes a creditable importation if:

•         the entity imports goods solely or partly for a creditable purpose; and

•         the importation is a taxable importation; and

•         the entity is registered, or required to be registered for GST.

The importation of goods will be a taxable importation, under section 13-5 of the GST Act as the goods have been imported and will be entered for home consumption. As the Entity is registered for GST, its importation will be a creditable importation if the goods are imported solely or partly for a creditable purpose within the meaning of section 15-10 of the GST Act.

Under subsection 15-10(1) of the GST Act, an entity imports goods for a creditable purpose to the extent that the entity imports the goods in carrying on its enterprise.

The first requirement for an entity to make a creditable importation is that the entity imports the goods. An entity is the importer of goods if it has caused the goods to be brought to Australia for its own purposes and the entity or its agent, is named as the 'owner' of the goods on the import declaration.

The Goods and Services Tax Ruling, Goods and services tax: importation of goods into Australia (GSTR 2003/15) explains the application of GST to importations and, at paragraphs 49 and 50 states:

49.  The entity that imports goods within the meaning of Division 15, in the context of a taxable importation under Division 13, is the entity that:

a)    causes the goods to be brought to Australia for application to its own purposes after importation, whether by way of supply, use, or otherwise; and

b)    completes the customs formalities for the entry of the goods for home consumption.

50.  The entity that causes goods to be brought to Australia is identified by looking to the purpose for which the goods are brought here. The entity whose purpose it is to apply the goods by way of supply, use or other application to its purposes after importation is the entity that causes the goods to be brought to Australia.

The Entity is the entity which will cause the good to be imported into Australia. It is responsible for the importation and the customs formalities.

However, the Entity will only be considered the importer if the goods are imported for the purposes of the Entity carrying on its own enterprise. Furthermore, subsection 15-10(1) of the GST Act also provides that an entity imports goods for a creditable purpose to the extent that the goods are imported in carrying on its enterprise. Paragraph 125 of GSTR 2003/15 states:

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.

The Entity causes the goods to be brought into Australia for its own commercial purposes. Although it will not undertake any work on the goods it imports, it must retain an amount of these rotatable stores at its facilities in order to swap goods in need of repair with operational goods. That is, the Entity will only be able to perform services on goods if it holds spare goods that can be swapped.

This is distinguishable from a freight forwarder or transportation provider which has no commercial interest in the goods being imported outside of the transportation and storage. Importing the goods in integral to the function of providing services to the Licensor and, as such the importation of the goods is made in the course of carrying on the Entity's enterprise. As such, the importation is made for a creditable purpose under subsection 15-10(1) of the GST Act. Furthermore, none of the exceptions apply contained in section 15-10 of the GST Act apply.

Consequently, once the goods have been entered for home consumption, the Entity will be making a taxable importation of the goods and the importation will be for a creditable purpose.

Accordingly, the Entity will make a creditable importation of the goods under section 15-5 of the GST Act.

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