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Ruling

Subject: GST and sale of imported goods

Questions

1. Do you make a taxable supply when you sell the imported goods to your customers in Australia?

2. Do you make a taxable importation under section 13-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when the goods are imported into Australia?

3. Do you make a taxable importation under section 114-5 of the GST Act when the goods are imported into Australia?

Answers

1. No, you do not make a taxable supply when you sell the imported goods to your customers in Australia.

2. No, you do not make a taxable importation under section 13-5 of the GST Act when the goods are imported into Australia.

3. No, you do not make a taxable importation under section 114-5 of the GST Act when the goods are imported into Australia.

Relevant facts and circumstances

You are a company incorporated in Australia.

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

You operate an internet-based business of marketing goods through your website. Customers from all over the world including Australia orders online and pay you for the goods. Most orders are of a low value.

You have an agreement with a wholesaler, an overseas entity, to market the goods through your website and purchase those goods from them at a discount on receipt of an order from your customer. You are not obliged to sell the goods at the wholesaler's prices.

The goods are shipped by the wholesaler from its warehouse located overseas directly to your customers in Australia through the mail or by air cargo.

Some goods are individually packaged per customer and put together in a box and transported to Australia. While the individual packages are addressed to the customers; the box is consigned to a freight forwarder in Australia.

Another entity, acting for the wholesaler, acquires the services of a freight forwarder to perform customs formalities on behalf of the customers.

Your customers are required to agree to the Terms of Service before their orders are accepted. The Terms of Service govern the use of your website, the order, supply and replacement of goods, and jurisdiction for any litigation arising out of the contracts which may arise between you and the customers.

Under the Terms of Service, your customers agree to be the importer of the goods for all legal purposes and accept all liability for any taxes and duties that may be applied when the goods are cleared through customs.

Your customers also agree that the ownership of the goods that they purchase is passed to them upon dispatch of the goods from the overseas storage facility.

The purchase price for the goods includes delivery costs. If a customer refuses to pay the delivery costs when ordering online, the order would not be completed.

The goods do not require installation or assembly.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5,

A New Tax System (Goods and Services Tax) Act 1999 section 9-25,

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 114-5 and

A New Tax System (Goods and Services Tax) Act 1999 section 195-1.

Reasons for decisions

Question 1

According to 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 is not a taxable supply to the extent that it is GST-free or input taxed.

All the requirements in section 9-5 of the GST Act must be satisfied for your sale of the imported goods to be a taxable supply.

In this case, you make the supply of the goods to your customers for consideration and in the course of carrying on your enterprise. Furthermore, you are registered for GST. Therefore, the requirements in paragraphs 9-5(a), 9-5(b) and 9-5(d) of the GST Act are satisfied.

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.

The goods that you supply to your customers do not require installation or assembly. Therefore, we must determine whether you, as the supplier, import the goods into Australia.

Goods and Services Tax Ruling GSTR 2003/15 discusses the operation of the provisions in the GST Act which apply to the importation of goods into Australia including section 9-25 of the GST Act.

Paragraphs 223 and 225 of GSTR 2003/15 state:

223. Both supplier and an 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.

In this case, you cause the goods to be brought to Australia when you purchase them from the wholesaler in order to sell them to your customers in Australia. However, under the Terms of Service, your customers agree to be the importer of the goods for all legal purposes and accept liability for any taxes and duties payable when the goods are cleared through Customs. Furthermore, another entity, acting for the wholesaler, acquires the services of the freight forwarder to attend to customs formalities on behalf of your customers. Therefore, you do not import the goods into Australia.

As subsection 9-25(3) of the GST Act is not satisfied, your sale of the goods to your customers is not connected with Australia. Accordingly, the requirement in paragraph 9-5(c) of the GST Act is not satisfied; hence, you do not make a taxable supply when you sell the imported goods to your customers in Australia.

Question 2

Section 13-5 of the GST Act provides 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).

In this case, the goods are imported into Australia; however, as discussed in the answer for question 1, you are not the entity that imports the goods. Therefore, you do not make a taxable importation under section 13-5 of the GST Act when the goods are imported to Australia.

Question 3

Subsection 114-5(1) of the GST Act states:

(1) You make a taxable importation if:

· the circumstances referred to in the third column of the following table occur; and

· you are referred to in the fourth column of the table as the importer in relation to those circumstances.

However, there is not a taxable importation to the extent that the importation to which the circumstances relate is a non-taxable importation

In this case, you are not the importer of the goods for the reasons stated above. Therefore, you do not make a taxable importation under section 114-5 of the GST Act when the goods are imported to Australia.