Edited version of private ruling

Authorisation Number: 1011612586803

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Ruling

Subject: GST and goods sent directly from non-resident supplier

Question

Are you making a taxable supply of spare parts to an Australian customer where the spare parts are delivered directly to your Australian customer by the non-resident supplier?

Answer: No.

Your supply of the spare parts to an Australian customer is not a taxable supply. GST is therefore not applicable.

Relevant facts

You are carrying on an enterprise of supplying parts and providing support.

You are registered for goods and services tax (GST).

You received a purchase order from a customer for spare parts. You ordered the spare parts from your non-resident head office.

The non-resident head office delivered the spare parts directly to your customer in Australia by air way bill via air freight.

Your Australian customer is entered as owner of the goods on the import entry documents and is responsible for the completion of any customs entry formalities. Your Australian customer engaged a customs broker to collect and clear the goods from the Customs and is liable for any duty, customs fee and GST on the import of the spare parts.

The customs broker charged your Australian customer for the import cost plus 10% GST inclusive of the value of the parts.

You act in your own right and do not act as an agent of the non-resident head office.

You do not receive any commission from the non-resident head office. You make profit based on the difference between what you paid to the non-resident head office for the spare parts and what the customer pay you. You invoiced the customer for the price of the goods with a 16% profit margin. You never physically receive or handle the goods.

You invoiced your Australian customer for the cost of the spare parts plus 10% GST.

Your Australian customer expressed concern via a complaint that they have paid GST twice.

Reasons for decision

Section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you must pay the GST payable on any taxable supply that you make.

A supply of goods is a taxable supply if all the requirements of section 9-5 of the GST Act are met, including the requirement that the supply is connected with Australia.

Under section 9-5 of the GST Act 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.

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

Based on the information provided, you have satisfied paragraphs 9-5(a), 9-5(b) and 9-5 (d) of the GST Act as your supply of goods is made for consideration, your supply is done in the furtherance of your business and you are registered for GST.

There are no provisions in the GST Act or any other Acts for the supply of your goods to your Australian customer to be GST-free or input taxed. Therefore, what remains to be considered is whether the supply of the goods to your Australian customer is connected with Australia under paragraph 9-5(c) of the GST Act.

Connected with Australia

The term 'connected with Australia' is defined in the GST Act at section 9-25. The relevant subsections are 9-25(1) and 9-25(3) of the GST Act.

Subsections 9-25(1) and 9-25(3) of the GST Act 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.

Supplies of goods wholly within Australia

Paragraphs 45 to 49 of Goods and Services Tax Ruling GSTR 2000/31 "supplies connected with Australia" (available at www.ato.gov.au ) cover the circumstances when a supply of goods is made wholly within Australia under subsection 9-25(1) of the GST Act.

In summary, the ruling provides that 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 this case, the spare parts are delivered directly from the overseas supplier to your customer in Australia. Your Australian customer is entered as owner of the goods on the import entry documents and is responsible for the completion of any customs entry formalities. Your Australian customer engaged a customs broker to collect and clear the goods from the Customs and is liable for any duty, customs fee and GST on the import of the spare parts. You never 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.

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.

In summary, the ruling provides that a supply of goods is connected with Australia if the supply involves the 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. Where the recipient imports the goods into Australia, the supply of goods is not connected with Australia.

In this case, you are not the importer of the goods as you do not attend to the customs formalities on importation of the goods. In addition, you do not install or assemble the goods in Australia. Accordingly, subsection 9-25(3) of the GST Act is not satisfied.

Consequently, the supply of goods to your Australian customer 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.

Therefore, the supply of goods is not a taxable supply and as such, the supply is not subject to GST.