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Ruling

Subject: GST and goods supplied directly by a non-resident supplier

Question 1

Is your supply of goods which are delivered direct from a non-resident supplier to your customers in Australia a taxable supply?

Answer

No your supply of goods which are delivered direct from a non-resident supplier to your customers in Australia is not a taxable supply.

Relevant facts and circumstances

You are a sole trader that has an Australian business number (ABN) and is registered for GST.

You are carrying on an online business that sells digital products (goods). You sell these items online. You operate your online business from your home in Australia.

You do not hold any physical stock at your premises. Your customers place their orders from your online store and send the payments to you.

Once the cleared payment is received, you will purchase the item from one of your non-resident suppliers who are located overseas. You enter the customers' details through your suppliers websites and you have the order shipped directly to your customers in Australia.

You advise the goods are always shipped from the non-resident suppliers, directly to your Australian customers; the stock is never shipped to you.

In addition the non-resident supplier is responsible for the completion of the customs formalities in relation to the shipping of the goods to the Australian customers.

You have not included GST in your sales to your customers.

You act in your own right and have no contractual relationship or agreement of any sort with any of your suppliers.

The non-resident supplier does not set the selling price for your supplies to your customers. You set the selling price in Australian Dollars on your online store.

You add shipping costs to your supplies and you pay the non-resident supplier for shipping costs that they incur.

The Australian customers are responsible for any duty, customs fees or GST on the import of the goods they order when they arrive in Australia. You advise that most of the transactions are well under AU$1000, therefore customers are not subject to GST on the importation of these goods.

Your business makes a profit based on the difference between what you paid to the non-resident supplier for the goods and what your customer has paid you for the goods.

Relevant legislative provisions

Section 9-5 of A New Tax System (Goods and Services Tax) Act 1999

Section 9-25(1) of A New Tax System (Goods and Services Tax) Act 1999

Section 9-25(3) of A New Tax System (Goods and Services Tax) Act 1999

Section 9-40 of A New Tax System (Goods and Services Tax) Act 1999

Section 13-15 of A New Tax System (Goods and Services Tax) Act 1999

Section 195-1 of A New Tax System (Goods and Services Tax) Act 1999

Reasons for decision

Supplies of goods to customers in Australia

Section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) defines goods as any form of tangible personal property. Where you sell your digital products, which are delivered from overseas, you are making a supply in the form of tangible personal property and, therefore, of goods.

Section 9-40 of the GST Act provides that you are required to pay the GST payable on any taxable supply that you make. The supply of your goods to the clients in Australia and overseas will be subject to GST if it meets the requirements of a taxable supply.

Section 9-5 of the 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.

From the facts of your case, you are making a supply of the goods for consideration. The supply is made in the course of you carrying on an enterprise in Australia, and you are registered for GST. Therefore, the supply of the goods meets the requirements listed in paragraphs 9-5(a), (b) and (d) of the GST Act.

It is now necessary to consider whether the supply of goods to your Australian customers is connected with Australia, under paragraph 9-5(c) of the GST Act.

Section 9-25 of the GST Act provides the requirements necessary for a supply to be connected with Australia. Supplies of goods are differentiated between:

· supplies of goods wholly within Australia

· supplies of goods from Australia (exports), and

· supplies of goods to Australia

In your situation, we need to consider supplies of goods within Australia and to Australia. Subsection 9-25(1) and 9-25(3) of the GST Act deal with these circumstances. Goods and Services Tax Ruling GSTR 2000/31 further explains when a supply is connected with Australia and Goods and Services Tax Ruling GSTR 2003/15 provides explanation on the importation of goods into Australia.

Supplies of goods wholly within Australia

In relation to subsection 9-25(1) of the GST Act, GSTR 2000/31 provides that the phrase delivered or made available means that the goods are either physically delivered, or if not physically delivered, are 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.

You have advised that the goods sold to the Australian customers are sent from overseas by the non-resident suppliers and are delivered directly to the recipients. Accordingly, the supply of these goods is not connected with Australia under subsection 9-25(1) of the GST Act, because you do not actually deliver or make the goods available in Australia to the recipients of the supply.

Supplies of goods to Australia

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

A supply of goods that involves those 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

Goods and Services Tax Ruling GSTR 2003/15, which deals with the importation of goods, discusses entities importing goods at paragraphs 223 and 224 as follows:

223. Both a 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.

The non-resident supplier causes the goods to be brought into Australia and is responsible for the completion of the customs entry formalities and delivery to the recipients. As such, the
non-resident entity is the importer of the goods.

As already determined above, you are not the importer of the goods as you do not complete the customs formalities. In addition, you do not install or assemble the goods in Australia. Accordingly you have not met the requirements in subsection 9-25(3) of the GST Act.

Furthermore, you have not met the requirements in subsection 9-25(2) of the GST Act as your supply of goods does not involve the goods being removed from Australia.

Therefore, the supply of goods to your customers in Australia is not connected with Australia under section 9-25 of the GST Act. A supply that is not connected with Australia does not satisfy paragraph 9-5(c) of the GST Act.

Consequently, the supply of goods to your customers in Australia is not a taxable supply under section 9-5 of the GST Act and as such, GST is not payable on the supply.

Other Information

All publications mentioned in this ruling are available on our website at www.ato.gov.au