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Ruling

Subject: GST and the importation of goods into Australia

Question 1

When is GST payable on the imported goods?

Answer

GST is payable when the goods are entered for home consumption.

Relevant facts and circumstances

You are a customs broker. You have raised the following situation with the Tax Office to determine when GST becomes payable.

Entity Y imports alcohol products into Australia. Before these goods are entered for home consumption, they are sold to another entity, being Entity X.

The goods are subject to customs control until such time as the goods are entered for home consumption and the Customs duty is then paid. Goods held in this manner are referred to as 'underbond' - goods on which customs duty is payable but is yet to be paid.

The goods are moved from Entity Y's customs warehouse to Entity X's customs warehouse on a continuing movement permission.

The continuing movement permission authorises Entity Y to move underbond goods on a regular or continuing basis between licensed premises as specified. With a continuing movement permission, individual authority does not need to be obtained each time goods are moved.

The goods remain underbond and Entity X pays duty and GST when the goods are entered for home consumption.

Entity Y invoices Entity X for the value of the goods and applies GST to this transaction.

Entity X requested you to obtain a ruling to support their contention that the sale of these goods is not subject to GST and the GST is payable on the goods at the time the goods are entered for home consumption.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 13-5,

A New Tax System (Goods and Services Tax) Act 1999 Division 114 and

Customs Act 1901 Section 4.

Reasons for decision

According to Section 13-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), an entity makes a taxable importation if:

· goods are imported, and

· the entity enters the goods for home consumption.

Goods and Services Tax Ruling GSTR 2003/15 Goods and services tax: importation of goods into Australia (GSTR 2003/15) is about the operation of the provisions in the GST Act that apply to the importation of goods into Australia.

According to paragraph 97 of GSTR 2003/15, the entity that enters goods for home consumption is the entity that makes the taxable importation. Typically, this is the importing entity, though in some cases it may be another entity. Under the Customs Act an entry for home consumption must be made by or on behalf of the 'owner' of the goods.

The 'owner' of the goods for Customs purposes is not restricted to the legal owner. Section 4 of the Customs Act 1901 (Customs Act) provides that the 'owner' can be:

… any person (other than an officer of Customs) being or holding himself out to be the owner, importer, exporter, consignee, agent, or person possessed of, or beneficially interested in, or having any control of, or power of disposition over the goods.

The wide meaning of 'owner' ensures that customs duty and GST can be collected on imported goods from the entity that enters the goods for home consumption, regardless of who imported the goods.

Paragraph 100 of GSTR 2003/15 provides that GST is not payable on the entry of imported goods for warehousing or transhipment.

Section 114-25 of the GST Act contains a special rule that states that:

(1)

If you enter for home consumption (within the meaning of the Customs Act 1901) goods that are warehoused goods (within the meaning of that Act) and that were imported by another person:

(a) you are treated, for the purposes of Division 15, as having imported the goods; and

(b) the extent (if any) to which you entered the goods for home consumption for a *creditable purpose is treated as the extent (if any) to which you imported the goods for a creditable purpose.

(2)

This section has effect despite Division 15 (which is about creditable importations).

This section recognises that an entity that imports goods may enter them for warehousing and store them in a Customs licensed warehouse. This entity normally satisfies paragraph 15-5(a) as being the entity that imports the goods. However, as the customs formalities do not result in a taxable importation under the normal GST rules, there is no creditable importation at that point.

An entity that imports goods, and enters the goods for warehousing, may make a supply of them while the goods are in the Customs licensed warehouse. In these circumstances, the entity that acquires the goods enters them for home consumption ex-warehouse if it wishes to take the goods out of the warehouse, and thus may make a taxable importation of the goods.

In this case, Entity Y imports the goods from overseas and makes a supply of the goods to Entity X while the goods are still underbond. Entity X enters the goods for home consumption and thus becomes liable for GST and Customs duty. Entity Y is not required to pay GST on the supply of goods to Entity X because they are not making a taxable supply, as the goods have not yet been entered for home consumption. It is the entity that completes the customs formalities that is seen as the 'importer' of the goods, thus it is that entity that will be liable for Customs duty and GST. Therefore, Entity Y is mistaken in charging GST to Entity X.