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Subject: GST and supply of imported goods
Question
Will the sale of your product to an Australian customer be a taxable supply?
Answer
No, the sale of your product to an Australian customer will not be a taxable supply.
Relevant facts and circumstances
You are registered for goods and services tax (GST).
You are currently negotiating with an Australia entity (your customer) to sell a product.
You will buy the product from an overseas supplier under FOB terms.
You will sell the product to your customer under FOB terms.
Your customer will pick up the product from an overseas port themselves and ship the product to Australia or another destination.
Your customer will be the receiver in the bill of lading and will complete the customs clearance and pay duty and GST.
For the purpose of calculating customs duty and GST, your customer will use the invoice issued by you.
You will pay the overseas supplier in foreign currency while your customers will pay you in Australian dollars.
You will not install or assemble the product in Australia.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-5; and
A New Tax System (Goods and Services Tax) Act 1999 section 9-25
Reasons for decision
GST is payable on a taxable supply. Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states:
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, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.
(*denotes a defined term in section 195-1 of the GST Act)
All the requirements in section 9-5 of the GST Act must be satisfied for your supply to be a taxable supply.
In this case, you will make the supply for consideration and in the course or furtherance of your enterprise. Furthermore, you are registered for GST. As such, the requirements in paragraphs
9-5(a), 9-5(b) and 9-5(d) of the GST Act will be satisfied. What is left to be determined is whether your supply will be connected with Australia to satisfy paragraph 9-5(c) of the GST Act.
Paragraph 9-5(c) of the GST Act
For the purpose of paragraph 9-5(c) of the GST Act, 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:
· imports the goods into Australia; or
· installs or assembles the goods in Australia.
Goods and Services Tax Ruling GSTR 2003/15 (available at www.ato.gov.au) explains the meaning of the word 'import' and its derivatives for the purposes of the GST Act. Paragraphs 223 and 224 of GSTR 2003/15 state:
223. Both supplier and acquirer of goods may cause the goods to be brought into Australia. The word 'import' must, therefore, in the context of paragraph 9-25(3)(a), also encompass completing the customs formalities. In that way it can be established which entity imports the goods into Australia, that is, the entity that not only causes the goods to be brought to Australia but also attends to the customs formalities.
224. The supplier, therefore, imports goods into Australia for the purposes of subsection 9-25(3) if it causes the goods to be brought to Australia and it also completes the customs formalities. This is the case where a supplier enters the goods for home consumption or for warehousing or transhipment. However, a supplier does not import goods where the customs formalities for the importation of the goods are completed by the recipient of the supply.
You advised that your customer will pick up the product from an overseas port and ship it to Australia or another destination. Your customer will complete the customs clearance and pay customs duty and GST. As such, it is your customer who will import the product into Australia. Paragraph 9-25(3)(a) of the GST Act will not be satisfied.
You advised that you will not install or assemble the product in Australia. Therefore, paragraph
9-25(3)(b) of the GST Act will also not be satisfied.
Summary
Your supply of the product to the Australian customer will not be connected with Australia because subsection 9-25(3) of the GST Act will not be satisfied. As such, the requirement in paragraph 9-5(c) of the GST Act will not be satisfied. Accordingly, the sale of your product will not be a taxable supply as GST will not be applicable to the sale.