Edited version of private ruling

Authorisation Number: 1011707602109

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Ruling

Subject: liability for GST on importations

Question 1

Is F Ltd liable for goods and services tax ('GST') on the importation of biodiesel made pursuant to an agreement ('Agreement') with T Ltd'?

Answer:

Yes, F Ltd is liable for GST on the importation of biodiesel made pursuant to an Agreement with T Ltd.

Question 2

Is F Ltd entitled to an input tax credit under Division 11 of the A New Tax System (Goods and Services Tax) Act 1999 ('GST Act') in respect of the acquisition of biodiesel from T Ltd pursuant to the Agreement?

Answer:

Yes, F Ltd is entitled to an ITC under Division 11 of the GST Act in respect of the acquisition of biodiesel from T Ltd pursuant to the Agreement.

Relevant facts and circumstances:

The Parties:

T Ltd is a company resident overseas which is registered for GST in Australia.

F Ltd is a company resident in Australia which is registered for GST in Australia.

X operates bulk liquid storage facilities at location A and Y operates bulk liquid storage facilities at location B. X and Y lease bulk liquid storage tanks to F Ltd at location A and B respectively and F Ltd sub-leases some of those storage tanks to T Ltd.

Since February 2010 T Ltd and F Ltd have entered into a number of contracts ('Agreement') whereby T Ltd agreed to sell biodiesel to F Ltd.

F Ltd's ruling request:

In July 2010 F Ltd requested a GST private ruling ('earlier private ruling').

In the ruling request F Ltd stated that T Ltd had suggested that T Ltd was obliged to charge GST on the supply of biodiesel to F Ltd which occurs in an Australian bonded area. As F Ltd was paying the GST and customs duty on the importation of the biodiesel, F Ltd considered that if T Ltd charged GST on the supply of the biodiesel to F Ltd, F Ltd in effect paid GST twice which was not the intention of the GST regime.

F Ltd sought GST rulings confirming that:

F Ltd was liable for GST in respect of a taxable importation of biodiesel made by F Ltd under F Ltd's arrangement with T Ltd;

as F Ltd makes a taxable importation of the biodiesel, T Ltd should not charge GST on the subsequent supply of the biodiesel to F Ltd as that would amount to a double charge of GST; and

the supply of biodiesel by T Ltd to F Ltd was not a taxable supply.

In support of the first ruling F Ltd relied on section 13-5 of the GST Act (which provides that an entity makes a taxable importation where goods are imported and the entity enters the goods for home consumption). F Ltd referred to clause 22 of the Agreement:

The Buyer [i.e. F Ltd] or the Buyer's customer shall be the importer of record and shall be responsible for complying with customs and excise entry procedures at the discharge port and shall be liable to the customs and excise authorities for all duties and taxes that arise in respect of such customs and excise entry.

and Goods and Services Tax Ruling GSTR 2003/15 (paragraph 55):

In respect of a single importation, more than one party may cause goods to be brought to Australia for application to their purposes. One entity may send the goods to Australia to supply them, and another entity may request or arrange for the goods to be sent so that it can acquire them to use or resell. Where this is the case, the importing entity is the one that finalises the importation process by completing the customs formalities. That is, the entity that enters the goods for home consumption is the entity that imports the goods in these circumstances.

F Ltd submitted that if T Ltd charged F Ltd GST on the supply of biodiesel that would amount to a double charge of GST (because F Ltd also paid GST on the importation of the biodiesel). F Ltd further submitted:

As [F Ltd] is making the taxable importation and paying GST at import, if [T Ltd] charges GST on the related invoice a double charge of GST will have occurred which we do not believe is in accordance with the spirit of the GST legislation.

In relation to the ruling sought by F Ltd that the supply of biodiesel by T Ltd to F Ltd was not a taxable supply, F Ltd referred to 's9-25(c) of the GST Act' (which we assume was intended to refer to subsection 9-25(3) of the GST Act):

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.

F Ltd then referred to GSTR 2003/15 (paragraphs 72-73):

For supplies of goods to Australia, paragraph 9-25(3)(a) provides that the supply is connected with Australia if the supplier imports the goods. A supplier imports goods where the supplier causes the goods to be brought to Australia to apply them to its own purposes and completes the customs formalities.

This is the case where a supplier causes the goods to be brought to Australia and enters the goods for home consumption, or for warehousing or transhipment (within in the meaning of the Customs Act). However, a supplier does not import goods where the customs formalities for the importation of the goods are completed by the entity that acquires the goods from the supplier.

F Ltd relied on the underlined words in paragraph 73 of GSTR 2003/15 and submitted that, in relation to a supply of biodiesel that involves the biodiesel being brought to Australia, T Ltd makes a taxable supply of that biodiesel only if T Ltd makes a taxable importation of that biodiesel (that is, T Ltd completed all the customs formalities). F Ltd then submitted:

It is clear from the operation of s.9-5, s9-25 and s13-5 and guidance provided by the Commissioner in GSTR 2003/15 that GST is only imposed on the acquirer once. Either the acquirer [F Ltd] is liable for GST on import (where they meet the criteria of a taxable importation, specifically where they are attending to the customs formalities); or the acquirer is liable to GST on the invoice from the supplier [T Ltd] but this is only where the supplier is taken to be making a taxable supply as they had made the taxable importation ( and thus the supplier was liable for GST on import). Given [F Ltd] is making the taxable importation, they should not be charged GST on any invoices from [T Ltd] relating to the acquisition of the biodiesel.

Documents supplied by F Ltd:

In support of the request for the earlier private ruling F Ltd provided a copy of an Agreement between T Ltd (as seller) and F Ltd (as buyer).

We understand that T Ltd acquired the biodiesel that T Ltd supplied to F Ltd from a location outside of Australia, shipped the biodiesel to Australia, and then pumped the biodiesel from the vessel to the storage tanks (which T Ltd sub-leases from F Ltd) located at X/Y's storage facilities at locations A and B.

At the time that the biodiesel arrived in Australia it was not immediately 'entered for home consumption' via the lodgement of a Nature 10 or N10 import declaration. Instead, T Ltd entered the biodiesel 'for warehousing' by lodging a Nature 20 or N20 import declaration. F Ltd provided a copy of a N20 Import Declaration which identified T Ltd as both owner and supplier of diesel loaded on a vessel at an overseas port and destined for discharge at location B into Ys warehouse. F Ltd also provided a copy of the N20 Authority to Deal issued by Australian Customs to T Ltd in respect of the same shipment which states:

This authority to take goods into warehousing is given under s.71DJ of the Customs Act 1901

We understand that the ITT and truck loading delivery methods whereby T Ltd delivers the biodiesel to F Ltd operate as follows: The fuel is pumped from the storage tanks sub-leased by T Ltd to a weigh bridge and then pumped into a blending tank which is leased by F Ltd at the same facility. Alternatively, the fuel can be pumped directly to trucks. In this case the fuel is blended in line with F Ltd's diesel.

F Ltd advised that F Ltd enters an entire shipment of biodiesel for home consumption and that this occurs before T Ltd delivers the biodiesel to F Ltd by ITT or truck transfer. The following documents provided by F Ltd support that advice:

A N20 Import Declaration dated 2 February 2010 in respect of Voyage No [ ] which states that the [vessel] carried [ ] litres of biodiesel, plus a N20 Warehouse Declaration issued on 3 February 2010 to T Ltd in respect of Voyage No [ ] of the [vessel].

A N30 Import Declaration dated 5 February 2010 names F Ltd as importer, refers to the [vessel], and states a Warehouse Quantity of [ ] litres of biodiesel which, although not an exact match to the quantity on the N20 Warehouse Declaration, supports F Ltd's advice that F Ltd as importer becomes liable for GST on the full shipment.

Copies of nine invoices issued by T Ltd to F Ltd between 1 February and 31 March 2010 which record sales of biodiesel.

We note that the Agreement required F Ltd to pay the price for the quantity of biodiesel purchased into T Ltd's bank account two days before the ITT against presentation of T Ltd's invoice. Thus the first of the nine invoices issued by T Ltd (dated 1 February 2010) was stated to be due for payment on 3 February 2010 which was 2 days before the ITT on 5 February 2010 (the same date as F Ltd imported the biodiesel ex the [vessel]).

The N30 Import Declaration supplied by F Ltd identifies F Ltd as the importer and shows the customs value plus freight and insurance, but no customs duty and an amount of deferred GST.

Earlier private ruling issued to F Ltd:

In August 2010 the ATO issued the earlier private ruling to F Ltd.

We ruled that F Ltd was liable for GST on the importation of the biodiesel. We considered that paragraph 13-5(a) of the GST Act was satisfied (as the biodiesel was shipped to and unloaded in Australia) and that F Ltd satisfied paragraph 13-5(b) of the GST Act (as F Ltd was responsible for complying with customs entry procedures, F Ltd was liable for all duties and taxes arising in respect of such entry, and the relevant N30 Import Declaration named F Ltd as the importer).

We also ruled that F Ltd was not entitled to an input tax credit under Division 11 of the GST Act in respect of the acquisition of the biodiesel from T Ltd. We considered that the supply of the biodiesel to F Ltd was not a taxable supply because that supply was not connected with Australia. The earlier private ruling addressed subsections 9-25(1) and (3) of the GST Act as follows:

According to subsection 9-25(1) of the GST Act, a supply of goods is connected with Australia if the goods are delivered, or made available, in Australia to the recipient of the supply. As you are the entity that imported the biodiesel, the supply of the biodiesel is not connected with Australia under subsection 9-25(1) because the biodiesel was not delivered, or made available to you in Australia.

Subsection 9-25(3) of the GST Act provides that 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.

In your case, the biodiesel is imported by you and not the supplier. And by its nature, the biodiesel is not installed or assembled in Australia. Therefore, the supply of the biodiesel is not connected with Australia under subsection 9-25(3) of the GST Act. As such the supply of the biodiesel to you is not a taxable supply.

Accordingly, you do not make a creditable acquisition when you acquire the biodiesel because the supply of the biodiesel to you is not a taxable supply. Therefore, you are not entitled to the input tax credit on the acquisition of the biodiesel.

Reasons for decision:

Question 1:

Summary:

As both requirements in section 13-5 of the GST Act are satisfied in relation to F Ltd (that is, the biodiesel is imported and F Ltd enters the biodiesel for home consumption), F Ltd is liable to pay the GST on the taxable importation of the biodiesel.

Detailed reasoning:

Section 13-15 of the GST Act provides that an entity must pay the GST payable on any taxable importation that that entity makes. Section 13-5 of the GST Act provides that an entity makes a taxable importation if goods are imported and the entity enters the goods for home consumption within the meaning of the Customs Act 1901, but an importation is not a taxable importation to the extent that it is a non-taxable importation.

Goods and Services Tax Ruling GSTR 2003/15 states (paragraph 55):

In respect of a single importation, more than one party may cause goods to be brought to Australia for application to their purposes. One entity may send the goods to Australia to supply them, and another entity may request or arrange for the goods to be sent so that it can acquire them to use or resell. Where this is the case, the importing entity is the one that finalises the importation process by completing the customs formalities. That is, the entity that enters the goods for home consumption is the entity that imports the goods in these circumstances.

The Agreement supplied by F Ltd provides:

The Buyer [i.e. F Ltd] or the Buyer's customer shall be the importer of record and shall be responsible for complying with customs and excise entry procedures at the discharge port and shall be liable to the customs and excise authorities for all duties and taxes that arise in respect of such customs and excise entry.

F Ltd advised that within 7 days of the biodiesel being pumped into T Ltd's tanks F Ltd lodges a Nature 30 Import Declaration which names F Ltd as the importer of record and F Ltd becomes liable for GST on the full shipment. The N30 Import Declaration supplied by F Ltd identifies F Ltd as the importer.

Based on these documents we are satisfied that the biodiesel is imported and that F Ltd enters the biodiesel for home consumption within the meaning of the Customs Act 1901. Consequently both requirements for a taxable importation in section 13-5 of the GST Act are satisfied in relation to F Ltd and F Ltd is liable for the GST payable on that taxable importation.

The importation is not a non-taxable importation as section 42-5 of the GST Act does not apply and the importation would not have been a GST-free or input taxed supply if the importation was a supply.

Question 2:

Summary

The supply of biodiesel by T Ltd to F Ltd pursuant to an Agreement is a taxable supply as it is connected with Australia in terms of subsection 9-25(1) of the GST Act, that is, the biodiesel is delivered in Australia to the recipient of the supply. The supply of biodiesel is not connected with Australia pursuant to subsection 9-25(3) of the GST Act.

To the extent that F Ltd relied on the earlier private ruling issued to F Ltd in relation to past acquisitions of biodiesel and did not claim input tax credits, subsection 357-70(1) of the Taxation Administration Act 1953 ('TAA') would allow F Ltd to now claim those input tax credits.

Detailed reasoning

Taxable supply:

Section 9-5 of the GST Act provides that an entity makes a taxable supply if the supply is made for consideration, the supply is made in the course or furtherance of an enterprise carried on by the entity, the entity is GST registered, and the supply is connected with Australia. In the present case the supply of biodiesel by T Ltd to F Ltd is made for consideration (the Agreement sets a unit price in USD), T Ltd carries on an enterprise (which includes a series of activities done in the form of a business), and T Ltd is registered for GST in Australia. The issue is whether the supply of biodiesel by T Ltd to F Ltd is connected with Australia.

Connected with Australia:

Subsections 9-25(1) to 9-25(3) of the GST Act determine whether a supply of goods is connected with Australia. Subsection 9-25(2) is not relevant as it deals with supplies of goods that involve the goods being removed from Australia. Subsections 9-25(1) and 9-25(3) provide:

(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.

…

(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.

Connected with Australia - can subsection 9-25(1) apply to the supplies of biodiesel made by T Ltd to F Ltd?

GSTR 2000/31 (paragraph 122) states:

Subsection 9-25(1) does not apply to goods where the supply is a supply of goods from Australia or to Australia. Supplies of this kind are covered by subsections 9-25(2) and (3) respectively…

We understand that the biodiesel supplied by T Ltd to F Ltd under each Agreement was brought to Australia by T Ltd. Consequently it could be argued, based on paragraph 122 in GSTR 2000/31 that subsection 9-25(1) has no application to the supply of the biodiesel by T Ltd to F Ltd. In our view, however, paragraph 122 is qualified by paragraph 123 in GSTR 2000/31:

However, this does not mean that the goods, the subject of a supply wholly within Australia, have to be domestic goods only. The goods being supplied may be domestic or imported goods…

Consequently we do not consider that subsection 9-25(1) cannot apply to the supplies of biodiesel made by T Ltd to F Ltd because the biodiesel involved was brought to Australia.

The meaning of 'delivered, or made available' in subsection 9-25(1):

Goods and Services Tax Ruling GSTR 2000/31 provides (paragraph 46):

In the context of subsection 9-25(1), 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.

GSTR 2000/31 provides further explanation (paragraphs 117-120):

Subsection 9-25(1) provides that a supply of goods is connected with Australia if the goods are 'delivered, or made available', in Australia to the recipient of the supply. The recipient, in relation to a supply, is the entity to which the supply is made.

In the context of subsection 9-25(1) the phrase 'delivered, or made available' takes the meaning that the goods are either physically delivered, or if not physically delivered, physically made available in Australia.

Made available refers to the situation where goods are not actually delivered to the recipient but rather the supplier makes the goods physically available to the recipient in Australia. For example, a supplier may make goods available for collection by the recipient. This is the case where a supplier of sand sells a load of sand to a customer and the customer takes away the sand which the supplier makes available.

Thus, goods are 'delivered' in Australia if the goods are actually physically delivered in Australia. Goods are made available in Australia if the goods are physically available for the recipient in Australia. Both 'delivered' and 'made available' look at the place where the physical goods are at the relevant time.

GSTR 2000/31 also provides (paragraphs 47):

Goods which are delivered or made available in Australia to the recipient may be goods that the supplier has acquired domestically or imported (see the example at paragraph 124 of the Explanations section).

and contains the following example (paragraphs 124-127):

Example 7 - Supplies of imported goods wholly within Australia

Joe goes to a car dealer in Perth and, after driving a demonstration model, agrees to purchase an Italian manufactured car of a particular model. The car dealer does not have that model car in stock. The car dealer orders and purchases the car from the Italian manufacturer and imports the car into Australia. When the car dealer receives the imported car, Joe is contacted and told that the car is ready for delivery.

Even though the car is imported by the car dealer, the supply from the car dealer to Joe is wholly within Australia. This supply is connected with Australia as the car is delivered to Joe in Australia.

This example illustrates that although the goods are supplied wholly within Australia, the goods themselves may be imported goods.

Under section 13-15 the car dealer, being the importer of the car, is liable to pay GST on the taxable importation that he makes. The car dealer is registered and the supply to Joe is a taxable supply, with GST payable by the car dealer on that supply. The car dealer is entitled to an input tax credit for the GST payable on the importation.

In the present case the Agreement indicates that T Ltd delivered the biodiesel to F Ltd in Australia.

Appendix C to Goods and Services Tax Ruling GSTR 2002/6 sets out the Incoterms 2000 (that is, codified terms of trade which set out the rights and obligations of the seller and buyer with respect to delivery of goods sold) and states that those terms fall into four categories - 'E', 'F', 'C' and 'D' terms. 'Ex works' is an 'E' term. Appendix C to GSTR 2002/6 states:

The 'E' term is where the seller's obligation is at its minimum. The seller usually places the goods at the buyer's disposal at the seller's own premises. In practice, the seller frequently assists the buyer to load the goods on the collecting vehicle.

and explains the 'Ex works' Incoterm as follows:

Ex works

The Seller places the goods at the disposal of the buyer at the seller's premises.

The Agreement provides for T Ltd to deliver the biodiesel to F Ltd at T Ltd's premises (that is, the storage tanks which T Ltd sub-leases from F Ltd at location A or B). In our view T Ltd delivered the biodiesel in Australia to the recipient of the supply (F Ltd) and the supply of the biodiesel is therefore connected with Australia in terms of subsection 9-25(1) of the GST Act.

The earlier private ruling - subsection 9-25(1):

In the earlier private ruling issued to F Ltd we reached a different conclusion in relation to subsection 9-25(1):

According to subsection 9-25(1) of the GST Act, a supply of goods is connected with Australia if the goods are delivered, or made available, in Australia to the recipient of the supply. As you are the entity that imported the biodiesel, the supply of the biodiesel is not connected with Australia under subsection 9-25(1) because the biodiesel was not delivered, or made available to you in Australia.

The underlined sentence set out above adopts the reasoning in the first sentence in paragraph 129 of GSTR 2000/31, that is:

A supply of goods that involves the recipient importing the goods into Australia is not connected with Australia under subsection 9-25(1) as the goods are not delivered, or made available, in Australia to the recipient of the supply.

Paragraph 129 of GSTR 2000/31:

Paragraphs 49 and 129 of GSTR 2000/31 deal with the situation where the recipient of a supply of goods imports those goods into Australia:

Where the recipient imports the goods into Australia, the supply of the 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.

A supply of goods that involves the recipient importing the goods into Australia is not connected with Australia under subsection 9-25(1) as the goods are not delivered, or made available, in Australia to the recipient of the supply. Also, the supply of goods is not connected with Australia under paragraph 9-25(3)(a) because the supplier does not import the goods. However, the recipient importer will make a taxable importation.

In the earlier private ruling we interpreted paragraph 129 in GSTR 2000/31 as meaning that a supply of goods was not connected with Australia under subsection 9-25(1) if the recipient of the supply enters the goods for home consumption. Upon further reflection we now consider that paragraphs 49 and 129 in GSTR 2000/31 should be interpreted consistently with Example 8 in GSTR 2000/31, which follows immediately after paragraph 129 as follows:

Example 8 - Goods supplied by resident supplier and imported by resident recipient:

Joe decides to fit his car with specialised seat covers. He approaches Seat Co in Sydney to supply the seat covers. However, the seat covers have to be imported from Italy. Under arrangements with Seat Co, Joe imports the seat covers into Australia and pays Seat Co for the goods once the seat covers are cleared through Customs. The supply of goods, specialised seat covers by Seatco to Joe, is not connected with Australia because the goods are not delivered, or made available to Joe, in Australia. However, Joe makes a taxable importation upon which GST is payable.

In Example 8 the supplier (Seatco) does not deliver the goods to the recipient (Joe) in Australia. Instead the supplier arranges for the overseas manufacturer to deliver the goods directly to the recipient (Joe) in Australia, Joe imports the goods, and Joe then pays Seatco. We consider that the words 'a supply of goods that involves the recipient importing the goods' in paragraph 129 in GSTR 2000/31 refer to cases where, as in Example 8, the supplier arranges for an overseas manufacturer to ship the goods directly to the recipient of the supply in Australia, the recipient imports the goods, and the supplier does not deliver the goods to the recipient in Australia.

In the present case, on the other hand, T Ltd entered the biodiesel for warehousing by lodging the N20 and the recipient (F Ltd) entered the biodiesel for home consumption by lodging the N30, but the supplier (T Ltd) delivered the biodiesel to the recipient (F Ltd) in Australia. Consequently we consider that the supply of the biodiesel by T Ltd to F Ltd pursuant to the Agreement was connected with Australia pursuant to subsection 9-25(1) of the GST Act and was a taxable supply.

GST should be imposed only once on a recipient:

The earlier private ruling did not address F Ltd's submission that GST should be imposed only once on a recipient of goods, that is, either where the recipient imports the goods or where a supplier imports the goods and then makes a taxable supply of the goods to the recipient.

We do not agree with this submission. As noted in GSTR 2000/31 (paragraph 152) the interaction of the concepts of taxable supply and taxable importation mean that a supply may involve both a taxable supply and a taxable importation. The operation of subsection 9-25(3) means that where a GST registered supplier imports goods and either installs or assembles those goods in Australia the supplier will pay GST once on the importation and again on a taxable supply of the goods.

Connected with Australia - subsection 9-25(3):

Subsection 9-25(3) of the GST Act provides:

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.

GSTR 2000/31 states (paragraphs 52-54):

A supply of goods is connected with Australia if the supply involves those goods being brought to Australia and the supplier either imports the goods into Australia (paragraph 9-25(3)(a)) or installs or assembles the goods in Australia (paragraph 9-25(3)(b)). The import of the goods into Australia or the installation or assembly of the goods in Australia is a supply of the goods to Australia.

This means that the supplier is either an exporter from outside Australia and importer into Australia, or an exporter from outside Australia and installer or assembler in Australia.

Paragraph 9-25(3)(a) does not apply to a supply of goods that involves goods being brought to Australia where the recipient imports the goods into Australia.

Footnote 24 to paragraph 54 states:

In this case the goods are supplied on an FOB or CIF basis.

Appendix C to GSTR 2002/6 explains FOB as where the seller delivers the goods over the ship's side at the port of shipment and clears the goods for export and explains CIF as where the seller delivers the goods over the ship's rail, pays costs and freight to bring the goods to the port of destination, clears the goods for export and obtains marine insurance against the buyer's loss or damage to the goods during the carriage. GSTR 2000/31 explains (paragraphs 141-142) that a supply of goods on FOB terms is not connected with Australia under subsection 9-25(3) of the GST Act because the goods are delivered or made available to the recipient outside Australia and the recipient completes the formalities for importation of the goods into Australia.

If a supply of goods involves the goods being delivered, or made available, to the recipient outside of Australia and the recipient subsequently imports the goods into Australia, the supply is not connected with Australia. The supply is not a taxable supply under section 9-5. However, the importation is a taxable importation and the recipient is liable to pay GST on the taxable importation.

Example 13 - Goods imported into Australia by recipient

If in Example 12 US Co sells the tractor to Tract Co on an FOB basis, the tractor is imported into Australia by the recipient and the supply of the tractor is not connected with Australia under paragraph 9-25(3)(a). As the tractor is not delivered, or made available, in Australia to Tract Co, the supply of the tractor is not connected with Australia under subsection 9-25(1). However, the supply is a taxable importation made by Tract Co and Tract Co is liable to pay GST on the taxable importation.

Subsection 9-25(3) is also discussed in GSTR 2003/15 (paragraphs 71-73):

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

For supplies of goods to Australia, paragraph 9-25(3)(a) provides that the supply is connected with Australia if the supplier imports the goods. A supplier imports goods where the supplier causes the goods to be brought to Australia to apply them to its own purposes and completes the customs formalities.

This is the case where a supplier causes the goods to be brought to Australia and enters the goods for home consumption, or for warehousing or transhipment (within in the meaning of the Customs Act). However, a supplier does not import goods where the customs formalities for the importation of the goods are completed by the entity that acquires the goods from the supplier.

The statements in GSTR 2000/31 (paragraph 54) and GSTR 2003/15 (paragraph 73) that a supply of goods is not connected with Australia pursuant to subsection 9-25(3) where the recipient of the supply imports the goods means that supplies of biodiesel by T Ltd to F Ltd pursuant to an Agreement are not connected with Australia pursuant to subsection 9-25(3) of the GST Act. The Agreement makes F Ltd or F Ltd's customer responsible for importing the biodiesel.

Although the discussion in GSTR 2000/31 focussed on cases where the recipient imports into Australia goods supplied on FOB or CIF terms, we do not consider that it was intended to limit the exclusion from paragraph 9-25(3)(a) to such cases.

Treatment of acquisitions of biodiesel already made by F Ltd:

Subsection 357-60(1), Schedule 1 to the TAA provides that a ruling binds the ATO in relation to an entity if the ruling applies to the entity and the entity relies on the ruling by acting or omitting to act in accordance with the ruling.

We understand that F Ltd has entered into four Agreements to buy biodiesel since February 2010. The earlier ruling was issued to F Ltd on 9 August 2010. In relation to acquisitions of biodiesel made by F Ltd which are attributable to the August 2010 or subsequent tax periods F Ltd may have relied on the earlier private ruling and not claimed input tax credits.

Subsection 357-70(1) of the TAA, however, provides that the ATO may apply a relevant provision to an entity in the way it would apply if the entity had not relied on a ruling if doing so would produce a more favourable result for the entity and the ATO is not prevented from so doing by a time limit imposed by a taxation law. In the ruling issued to F Ltd we ruled (Question 2) that F Ltd was not entitled to an input tax credit under Division 11 of the GST Act on the acquisition of biodiesel from T Ltd. If F Ltd had applied Division 11 in the way Division 11 would apply if F Ltd had not relied on the ruling, F Ltd would have claimed the relevant input tax credits, which would have produced a more favourable result for F Ltd by reducing F Ltd's net amount. As the acquisitions of biodiesel were made after February 2010, there is no time limit imposed by a taxation law which prevents the ATO from treating those acquisitions as creditable.

Consequently we consider that F Ltd may apply Division 11 as if F Ltd had not relied on Question 2 in the ruling issued to F Ltd and claim the relevant input tax credits.