Edited version of private ruling

Authorisation Number: 1011695881936

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Ruling

Subject: GST and importation

Question

Is the importation of books into Australia by an overseas based publisher (non-resident), subject to goods and services tax (GST)?

Answer

Yes, the importation of books into Australia by an overseas based publisher (non-resident) is subject to GST.

Relevant facts

You are a small overseas based publisher which consists of two authors.

You are not registered for goods and services tax (GST) in Australia.

During last year, you published a book and exported some copies of the book to a location in Australia.

The copies of your book were directed to a bookshop, which is the entity that attended to the customs clearance on your behalf.

Later in the year, the two authors came to this location and drove around the area delivering the copies of the book to other bookstores and outlets.

You have also received a tax invoice, which shows the amount of the GST liability on the importation of books. You found that the customs clearance has been done under the Australian Business Number of the abovementioned bookshop.

In response to your queries, the Australian Customs have advised that:

§ all cargo items to Australia will attract GST.

§ the name of the entity that enters the goods to Australia appears on the Customs' entry form.

§ the entity that appears on the entry form as the owner is liable to pay GST.

§ the Australian company that cleared the goods can in turn bill you for the GST but if you are not registered for GST, you cannot claim back the GST.

You have now written to the Australian Taxation Office to find out if there is any discretion that can be applied to exempt you from the GST liability.

Reasons for decision

Detailed reasoning

Subsection 7-1(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that GST is payable on taxable supplies and taxable importations.

Any entity can make a taxable importation, as there is no requirement that the entity be registered for GST purposes, or that the importation is made in the course of carrying on an enterprise. This is because GST is a tax on private consumption and private consumers can import goods directly.

The entity that makes the taxable importation must pay the GST payable on the taxable importation.

Taxable Importations

Section 13-5 of the GST Act states that you make a taxable importation if goods are imported and you enter the goods for home consumption (within the meaning of the Customs Act 1901 (Customs Act)).

However, such an importation is not a taxable importation to the extent that it is a non-taxable importation. Section 13-10 of the GST Act states that an importation is a non-taxable importation if it falls under Part 3-2 of the GST Act, or, had it been a supply that would have been GST-free or input taxed.

An importation is not a taxable importation to the extent that it is a non-taxable importation. 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 the Australian Customs Service (Customs), it is a matter for Customs to determine if an importation is covered by items referred to in section 42-5 of the GST Act.

If the relevant books had been a supply that would have been GST-free or input taxed, the importation is non-taxable. As such, in your case, we determine that the importation of your books is not a non-taxable importation under paragraph 13-10(b) of the GST Act.

Liability to pay GST on importations

Goods and Services Tax Ruling GSTR 2003/15 (GSTR 2003/15) Goods and services tax: Importation of goods into Australia explains that if an entity, as the 'owner', lodged an import entry in its name, that entity enters imported goods for home consumption within the meaning of the Customs Act and the entity is liable to pay GST on that importation, if the importation is a taxable importation.

Importation by non-residents / resident agents

Division 57 of the GST Act contains special rules which deal with cases where resident agents acting for non-resident owners. Under these special rules, resident agents acting for non-residents are responsible for the GST consequences of supplies and acquisitions the non-residents make through their agents.

Paragraphs 209 to 210 of GSTR 2003/15 state:

209. Under section 57-5, the resident agent of a non-resident is liable to pay GST on any taxable importation that the non-resident makes through the resident agent. The GST is not payable on the taxable importation in this case by the non-resident principal. Section 57-5 overrides the principles of the general law of agency which would otherwise apply.

210. Taxable importations are made by an entity entering imported goods for home consumption. A non-resident entity makes a taxable importation through a resident agent if the agent, on behalf of the non-resident, enters the goods as 'owner' on the customs entry form. Entering the goods as 'owner' means that the agent's name is shown on the entry form as the 'owner'. An agent is within the statutory definition of 'owner' in the Customs Act. In this case, section 57-5 makes the agent liable for GST on the taxable importations.

Further, as explained in paragraph 211 of GSTR 2003/15, where an agent enters goods for home consumption in the name of a non-resident, the name of the non-resident will appear as the owner on the entry for home consumption and the taxable importation is not made through the resident agent. In such cases, the entry for home consumption is made by the non-resident and the non-resident principal is liable to pay GST on the importation. The importation is not made through the agent, but the agent is only assisting in the administrative process.

Based on the facts in your case, you have imported the books into Australia through a resident agent (bookshop). The books have been entered into Australia in the name of the bookshop as the agent, and therefore, the agent was making the taxable importation of your books. As such, for the purposes of Division 57 of the GST Act, you (non-resident) made the taxable importation through a resident agent and the agent is liable to pay GST on the importation of books.

Creditable importations

GSTR 2003/15 also discusses the entitlement to input tax credits for creditable importations.

The entity that imports goods is the entity that:

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

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

The first requirement for an entity to make a creditable importation is that the entity imports the goods.

An entity makes a creditable importation under Division 15 of the GST Act if the entity imports goods solely or partly for a creditable purpose, the importation is a taxable importation, and the entity is registered, or required to be registered.

The meaning of creditable purpose is also discussed in GSTR 2003/15. Goods are imported for a creditable purpose when they are imported for the purposes of an enterprise, not for some other purpose such as private use and not to the extent that the importation relates to making supplies that would be input taxed.

Under section 15-5 of the GST Act there are three requirements that must be satisfied for an importation to be creditable importation. They are:

§ the importation of goods solely or partly for a creditable purpose; and

§ the importation is a taxable importation; and

§ the importer is registered or required to be registered.

Creditable importations made through resident agents

If a non-resident makes a creditable importation, the non-resident is entitled to the input tax credits.

With reference to non-residents, paragraph 215 of GSTR 203/15 states:

215. A non-resident makes a creditable importation where all the requirements for making a creditable importation are satisfied. That is, the non-resident must be the entity that imports the goods (see paragraphs 120 to 155) and must do so for a creditable purpose, and be registered or required to be registered. The importation must also be a taxable importation.

However, if the non-resident makes a creditable importation through a resident agent, only the agent is entitled to claim the input tax credit. The non-resident is not entitled to claim the credit on the creditable importation.

It is important to note that a resident agent is not entitled to an input tax credit under section 57-10 of the GST Act, simply because that agent is liable to pay GST under section 57-5 of the GST Act. When a taxable importation is made through a resident agent, it does not necessarily mean that a creditable importation has also been made. The requirements for a creditable importation must be satisfied by the non-resident. That is, the non-resident must import the goods for a creditable purpose, the importation must be a taxable importation and the non-resident must be registered or required to be registered.

In your case, you import the books into Australia as a non-resident through your resident agent and the importation is a taxable importation. However, you are not registered or required to be registered for GST in respect of the importation. As you do not make regular sales of the books in Australia, your GST turnover does not meet the registration turnover threshold (current threshold applicable in your case is $75,000). Therefore, you do not make a creditable importation, as you do not satisfy all the requirement of section 15-5 of the GST Act.

Consequently, your resident agent is not entitled to input tax credit, as the non-resident principal has not made a creditable importation through its resident agent. As you are a non-resident principal that is not registered for GST, you are not entitled to input tax credits in respect of the importation of books.