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Ruling

Subject: GST and supplies connected with Australia

Question

Is the sale of goods located in a bonded tank in Australia a taxable supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) where the supplier has brought the goods to Australia but does not complete any of the Customs formalities (i.e. is not named as 'owner' on the N20 or N30 Import Declarations)?

Answer

No.

Relevant facts

The Applicant is a global supplier of specialty products.

The Applicant supplies the Products of overseas origin to Entity A.

The Applicant and Entity A entered into a Supply Agreement (Agreement) which states that the Applicant shall 'sell and deliver or make available for delivery' and Entity A shall 'purchase, take delivery of and pay for' Products in the quantities, at the prices, and in accordance with the terms and conditions of the Agreement. The Agreement also states:

· The Applicant shall supply and Entity A shall take delivery of specified quantities (plus or minus 5%) of the Products for the first six months.

· The Agreement is for X years term.

· Entity A is required to notify the Applicant in writing of the estimated monthly volumes required for each six-month period (Estimated Delivery Volume) 60 days prior to the start of that period. At least 30 days prior to the start of each month within that six-month period, Entity A is required to notify the Applicant of the required monthly volume for delivery in that next month (Required Monthly Volume) which is then adjusted (Entity A Confirmed Volume) by the Applicant for the purpose of ensuring that Products delivered in any month are delivered in full cargo lots (a minimum ZZZ).

· The Agreement outlines the delivery procedures and provides that the Applicant delivers the Product into storage facilities at Entity A's nominated storage facility locations. The Applicant shall, as a minimum, deliver to Entity A's storage facility locations the Entity A Confirmed Volume.

· The Applicant acknowledges that Product will be stored on a 'co-mingled basis' with Entity A product purchased from local suppliers or imported product by other customers provided that Entity A shall procure that all Products shall meet Australian standards on delivery.

· The Applicant confirmed that the storage facilities are either owned by Entity A or leased by Entity A from a third party. Although the Agreement contemplated Entity A and the Applicant entering into Storage Facilities Agreements, that did not occur.

· The Agreement also deals with 'Offtake' and provides that Entity A shall load Product to which title has passed to Entity A, at its own risk and expense from the nominated storage facility into trucks from the loading gantry at Entity A's Terminal (the 'Terminal') from inventory held within the Terminals. All Products sold to Entity A under the Agreement are sold on a bonded, non-customs cleared basis and it is Entity A's sole obligation and responsibility (at its own cost and risk) to complete all necessary Customs formalities and other regulatory requirements and pay all Australian duties, fees, and taxes in respect of and after discharge of the Product into storage containers at Entity A's nominated Storage Terminal.

· The clause that deals with Scheduling provides that at the beginning of each month during contract term the parties shall agree a forward plan (including delivery windows) for deliveries for the next three months. Such forward plan will be agreed between the parties acting reasonably.

· A clause in the Agreement provides that the Products will be priced based on a prescribed formula.

· The Agreement provides for price reviews and sets out how the quantity and quality of any delivery of Products shall be determined.

· The clause that deals with 'Payment' provides that payments in respect of Product delivered for Entity A's account will be based on volumes recorded at the loading gantry at the Terminal for each truck loading. The Applicant will issue an invoice to Entity A Three (3) business days following at the end of every month of offtake for all Product delivered for Entity A's account and lifted during that month. Payment will be due to the Applicant no later than a certain day of the month following the month of offtake. Any amounts due under the Agreement are exclusive of GST. If the supply of Product under this Agreement is or becomes subject to GST, Entity A must pay to the Applicant an additional amount equal to the price payable under an invoice plus any applicable GST.

· A clause in the Agreement requires Entity A's payment obligations under the Agreement to be secured by an Irrevocable Standby Letter of Credit (SBLC):

· The Agreement provides for a rolling SBLC regime to apply in respect of any delivery of Products pursuant to the Agreement. Each SBLC issued pursuant to the clause is valid for 30 days. On the first day of each month Entity A arranges for a SBLC to be amended or issued to cover the price of the Confirmed Entity A Volume of each Product scheduled for delivery in that month plus the Estimated Delivery Volume of each Product scheduled for delivery in the following month. On a certain day of each month Entity A must revise the face amount of the SBLC to reflect Entity A Confirmed Volume of Products for delivery in both months adjusted for underlifted and overlifted quantity value. Entity A may procure a revision of a SBLC on any day that the Applicant receives payment in respect of an invoice for a delivery of Products by reducing the face value of the SBLC by the amount of the payment.

· There are clauses in the Agreement which deal with laytime for discharge of a full cargo and payment of demurrage.

· The clause that deals with 'Title and Risk' states that Provided Entity A complies with its obligations under the rolling SBLC regime, title shall pass in respect of a volume of Product the cost of which is equal to any SBLC Amount at the time when the Applicant confirms receipt of the SBLC.

· Clause Y deals with 'Taxes and Duties' and it states that all taxes, customs and other duties to be levied on the Products at discharge port or whilst stored in the nominated storage terminal in Australia, if any, shall be paid by Entity A. For the purposes of this Agreement, Entity A shall at all times be deemed to be the importer of the Product, as that term may be interpreted or construed under relevant rules and legislation.

The Applicant provided copies of Import Declaration N20 (Declaration into a Warehouse) (N20) prepared by the customs broker which show Entity A as the 'Owner' of Products loaded overseas and discharged in Australia into a warehouses described as 'Entity A Terminals Bond' or 'Site B Bond'.

The Applicant stated in the ruling request that title to the Products passes to Entity A while the Products are in the bonded storage tanks and before the Products are entered for home consumption.

The Applicant advised that, at the time the Import Declaration N30 (Import Declaration out of Warehouse) (N30) is lodged by Entity A, title to the Products has already passed to Entity A, that the N30 lists Entity A as the Owner of the Products, and that Entity A pays the applicable customs duty and GST levied on importation. The Applicant does not enter any of the Products for home consumption either under Import Declarations N10 or N30, nor is the Applicant named as the 'Owner' of the Products for Customs purposes.

The Applicant is registered for GST and has treated the sale of the Products to Entity A as taxable supplies.

In support of the ruling request the Applicant referred to paragraphs 71 to 73 in Goods and Services Tax Ruling GSTR 2003/15:

71. 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.

72. 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.

73. 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.

and submitted that as all Customs formalities are completed by Entity A and not by the Applicant, supplies of the Products by the Applicant to Entity A are not connected with Australia and the Applicant is not obliged to account for GST in respect of those supplies.

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 Subsection 9-25(1).

A New Tax System (Goods and Services Tax) Act 1999 Subsection 9-25(3).

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

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

Reasons for decision

Summary:

The supply of the Products by the Applicant to Entity A pursuant to the Agreement is not connected with Australia pursuant to subsection 9-25(3) of the GST Act. Nor is that supply connected with Australia pursuant to subsection 9-25(1) of the GST Act.

Detailed reasoning:

Taxable supply:

An entity is liable to pay the GST on any taxable supply that that entity makes.

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) sets out the requirements for a taxable supply:

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 for GST.

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

(* denotes a term defined in section 195-1 of the GST Act.)

All of the requirements of section 9-5 of the GST Act must be satisfied for the sale of the Products by the Applicant to be a taxable supply.

The Applicant is registered for GST and the sale of the Products to Entity A is made for consideration and in the course of an enterprise carried on by the Applicant. Therefore the Applicant satisfies the requirements of paragraphs 9-5(a), 9-5(b) and 9-5(d) of the GST Act. Furthermore, the sale of the Products in the circumstances described is neither GST-free nor input taxed.

It remains to be determined whether the supply of the Products by the Applicant is connected with Australia under paragraph 9-5(c) of the GST Act.

Supplies connected with Australia

Section 9-25 of the GST Act sets out the circumstances in which a supply is connected with Australia. In this case, of relevance are subsections 9-25(1) and 9-25(3) of the GST Act, which state:

Supplies of goods wholly within Australia

(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.

Supplies of goods to Australia

(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.

Goods and Services Tax Ruling GSTR 2000/31 explains when a supply is connected with Australia under section 9-25 of the GST Act and Goods and Services Tax Ruling GSTR 2003/15 explains the operation of provisions of the GST Act which apply to the importation of goods into Australia.

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

The ruling request addressed subsection 9-25(3) of the GST Act and included a submission that as the Applicant does not complete any Customs formalities, the supply of the Products is not connected with Australia.

Paragraphs 52 to 56 in the 'Ruling' section of GSTR 2000/31 discuss a supply of goods to which subsection 9-25(3) applies:

52. 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 goods to Australia.

53. 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.

54. 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.

55. Under paragraph 9-25(3)(a) a supply of goods brought to Australia is connected with Australia if the supplier imports the goods regardless of whether or not the supplier engages a Customs broker to arrange customs clearance of the goods.

56. A supply that is connected with Australia under paragraph 9-25(3)(a) may give rise to a taxable supply and a taxable importation where the supplier imports the goods into Australia.

Paragraph 52 of GSTR 2000/31 refers to paragraphs 71 to 74 (already set out above) and paragraphs 221 and 222 of GSTR 2003/15:

221. One of the requirements for a supply to be a taxable supply is that the supply is connected with Australia.

222. For supplies of goods to Australia, paragraph 9-25(3)(a) provides that a supply is connected with Australia if the supplier imports the goods into Australia.

The 'Explanation' section of GSTR 2000/31 contains a number of Examples where section 9-25(3) is or is not satisfied, including Example 13 where subsection 9-25(3) is not satisfied because the goods are imported by the recipient of the supply:

142. If…US Co sells the tractor to Tract Co [an Australian earthmoving operator] on a 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)…

Paragraph 147 of GSTR 2003/15 states that an entity completes the customs formalities where that entity's name appears on the import entry as 'owner' and that this occurs where the entity completes the entry itself, or engages a customs broker.

In the Applicant's case, the Agreement provides that all Product sold to Entity A under the Agreement is sold on a bonded, non-customs cleared basis and it is Entity A's sole obligation and responsibility (at its own cost and risk) to complete all necessary Customs formalities and other regulatory requirements and pay all Australian duties, fees, and taxes in respect of and after discharge of the Product into tanks at Entity A's nominated Storage Terminal.

Although we have not seen any of the relevant N30s, the Applicant stated in the ruling request that the Applicant is not named as Owner on either the N20 or N30 and the copies of N20s completed by Expeditors International and provided to us refer to Entity A as Owner of the Products.

We therefore accept that the Applicant does not 'import the goods' for the purposes of subsection 9-25(3). Nor does the Applicant install or assemble the goods in Australia.

Consequently the supply of the Products by the Applicant to Entity A is not connected with Australia pursuant to subsection 9-25(3) of the GST Act.

Subsection 9-25(1) of the GST Act

Subsection 9-25(1) appears beneath the heading 'Supplies of goods wholly within Australia' and states 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.

Paragraphs 45 to 47 in the 'Ruling' section of GSTR 2000/31 state:

45. A supply of goods is connected with Australia if the goods are delivered, or made available, in Australia to the recipient of the supply (subsection 9-25(1)). If goods are delivered or made available in Australia to the recipient of the supply, the supply of goods is wholly within Australia.

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.

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).

In the 'Explanation' section of GSTR 2000/31 paragraph 116 refers to the heading 'Supplies of goods wholly within Australia' which appears above subsection 9-25(1) of the GST Act and states that that heading forms part of the GST Act:

…and points to the operation of subsection 9-25(1) being limited to the supply of goods wholly within Australia. This limitation is also supported by the Explanatory Memorandum accompanying the GST Act which shows, diagrammatically, the supply and receipt of goods wholly within Australia.

Paragraphs 117 to 120 of GSTR 2000/31 explain how goods are 'delivered' or 'made available' to the recipient of the relevant supply for the purposes of subsection 9-25(1):

117. 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.

118. 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.

119. 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.

120. 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.

The 'Delivery Procedures' and 'Offtake' provisions in the Agreement indicate that the Applicant makes the Products physically available, in Australia, for collection by Entity A:

each month the Applicant delivers the Entity A Confirmed Volume of Products to the storage tanks nominated by Entity A and located in Australia;

to the extent that the cost of the Products delivered during each month equals the face amount of the SBLC which Entity A arranges to be issued or amended on the first day of that month, title to those Products passes to Entity A when the Applicant confirms receipt of that SBLC; and

Entity A then takes Products from those storage facilities, loads them into trucks pursuant to the 'Offtake' provision in the Agreement and lodges the N30.

As noted above, paragraph 47 of GSTR 2000/31 states that goods which are delivered or made available in Australia to the recipient may be goods that the supplier has imported and refers to the example at paragraph 124 of GSTR 2000/31:

Example 7 - Supplies of imported goods wholly within Australia

124. 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.

125. 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.

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

Example 7 states that a supply of goods that have been imported is nevertheless a supply that is 'wholly within Australia' if those goods are delivered to the recipient in Australia. Given the emphasis in GSTR 2000/31 on where the goods are physically delivered or made available, there appears to be no distinction between Example 7 (where the supplier imports the goods and then physically delivers the goods to the recipient in Australia) and the present case (where the supplier physically makes the goods available to the recipient in Australia and the recipient then lodges the N30 and pays the customs duty and GST levied on importation).

However paragraph 49 in the 'Ruling' section of GSTR 2000/31 suggests that subsection 9-25(1) cannot apply to a supply where the recipient of the supply enters the goods for home consumption:

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

Paragraph 129 in the 'Explanation' section of GSTR 2000/31 repeats the proposition stated in paragraph 49 and paragraph 130 provides an example:

129. 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.

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

130. 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 the 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.

On the one hand, paragraph 49 suggests that subsection 9-25(1) cannot apply to a case where the recipient of a supply of goods imports the goods into Australia. On the other hand, the underlined words in paragraph 129 (above) indicate that paragraph 49 simply acknowledges that if the recipient of a supply of goods imports the goods into Australia, the goods must have been delivered or made available to the recipient outside Australia, in which case subsection 9-25(1) does not apply. The second view is illustrated in Example 8 where the seat covers must have been delivered or made available to Joe (or Joe's agent) Italy as Joe imports the seat covers to Australia and clears them through Customs and the Australian supplier of the seat covers (Seat Co) never handles the seat covers.

The second view is also supported by the discussion of the application of subsection 9-25(1) and 9-25(3) in two Examples in the Explanation section of GSTR 2000/31 which involve the supply of goods to Australia on different Inco terms:

Example 12 - Goods imported into Australia by supplier

140. US Co, a US company sells a tractor to Tract Co, an Australian earthmoving operator, on a DDP basis. US Co has to import the tractor into Australia. The supply made by US Co to Tract Co is a supply connected with Australia as the tractor (goods) is brought to Australia and it is US Co (the supplier) that imports it into Australia.

(Footnote 37 explains that 'DDP' means delivered duty paid where the seller is responsible for all costs and risks to a specific destination in the importing country (including unloading at port, storage, import licence fees, duties, taxes, insurance etc.)

141. 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

142. 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.

Paragraph 251 in GSTR 2000/31 explains FOB terms:

251. FOB - means Free On Board. Seller is responsible for all costs and risks until the ships rail (loading onto ship).

The FOB terms in Example 13 mean that the recipient of the supply enters the goods for home consumption in Australia.

Notwithstanding that Example 13 involves a supply of goods that are imported into Australia, GSTR 2000/31 considers the application of both subsection 9-25(3) and subsection 9-25(1). In relation to subsection 9-25(1), paragraph 141 and Example 13 indicate that the tractor is not delivered or made available, in Australia, to the recipient of the supply because, under the FOB terms, the supplier (US Co) delivers the tractor to the recipient outside of Australia (i.e. delivers the tractor to the ship in the United States). However, the discussion in paragraph 141 and Example 13 concerning the non-application of subsection 9-25(1) does not apply to the supply of Products by the Applicant to Entity A because clause 5 of the Agreement obliges the Applicant to deliver the Products, in Australia, to the recipient of the supply (Entity A).

Reference to ATO Technical Projects:

Given the uncertainty concerning paragraph 49 in GSTR 2000/31, the ruling request was escalated to the ATO's Technical Projects section.

Technical Projects found that the fact that Entity A completed the N20 and N30 was determinative and referred to the discussion in Goods and Services Tax Ruling GSTR 2003/15 concerning which entity imports goods for the purpose of Division 15 of the GST Act (which contemplates only one importer) where both the supplier and recipient can be said to have caused the goods to be brought to Australia. GSTR 2003/15 states that, in the context of Division 15, importation is not achieved merely by landing the goods in Australia but also requires completion of Customs formalities (Para 137) and that where the parties agree to FOB, CIF or DDU Inco terms, the buyer is responsible for customs entry formalities.

Technical Projects considered that in the present case the terms in clause W of the Agreement, where Products are sold on a bonded, non-customs cleared basis and it is Entity A's sole obligation and responsibility (at its own cost and risk) to complete all necessary Customs formalities and other regulatory requirements and pay all Australian duties, fees, and taxes in respect of and after discharge of the Product into storage containers at Entity A's nominated Storage Terminal, are similar to DDU terms (described in GSTR 2003/15 as where the parties intend for the seller to deliver goods to the buyer's premises, but for the buyer to pay the GST to Customs on the entry (Paragraph 145, footnote 66)). Technical Projects referred to Example 6 in GSTR 2003/15, particularly Paragraph 182:

Example 6 - Several parties with an interest in imported goods before they are entered for home consumption

179. Mining Co Pty Ltd, an Australian company, wishes to obtain some specialised equipment which is only available from a Korean manufacturer. It contacts the company in Korea, Korean Co, to ascertain whether the equipment could be supplied with a modification to meet Mining Co's particular requirements. Korean Co indicates that it should be possible for the equipment to be modified in line with Mining Co's request, but advises that all Australian supplies of its equipment are made through an Australian distributor, Hardy Co Pty Ltd. Hardy Co operates as a distributor for several overseas suppliers of custom-made equipment through a small office in Sydney. It does not carry any stock, but rather sources the equipment from the overseas companies for which it acts as distributor in response to orders from customers. Both Mining Co and Hardy Co are registered for GST.

180. Mining Co enters into a contract with Hardy Co Pty Ltd for supply of the equipment on CIF terms which require Hardy Co to arrange for the equipment to be shipped to Australia. Hardy Co in turn purchases the equipment from Korean Co, also under CIF terms requiring Korean Co to arrange the shipping of the equipment to Australia.

181. All three parties can be said to cause the goods to be brought to Australia for their own purposes; Korean Co to sell to Hardy Co, Hardy Co to sell to Mining Co, and Mining Co to use in its mining business. Whichever of these entities completes the customs formalities by making the taxable importation is the entity that imports the goods. This would normally be agreed by the parties in the terms of the contract. When the equipment arrives in Australia, it is more likely that either Hardy Co or Mining Co would enter the goods for home consumption and would be liable to pay GST. Whichever of these parties undertakes this function is the entity that imports the goods. Only that entity is entitled to an input tax credit, assuming the other requirements for a creditable importation are satisfied.

182. If Mining Co makes the taxable importation by entering the goods for home consumption, the supply of the equipment by Hardy Co to Mining Co is not a taxable supply under section 9-5. This is because the supply of those goods is not connected with Australia as required for a taxable supply under that section. Subsection 9-25(1) does not apply to make the supply connected with Australia because the supply is not a supply of goods 'wholly within Australia'. Rather, the supply is one that involves the goods being 'brought to Australia'. This is because the goods are not in Australia when the arrangement for the supply is made, and the contractual arrangement requires the parties to complete the process of importing the goods into Australia. That is, to complete the transporting of the goods to Australia, and the customs entry. Subsection 9-25(3) is also not satisfied. While that subsection applies to supplies that involve goods being brought to Australia, a connection with Australia only exists if the supplier either imports the goods into Australia or installs or assembles the goods in Australia. Neither situation is applicable in this case. The supplier, Hardy Co, is not the importer of the goods as it did not attend to the customs formalities on importation of the goods.

183. Mining Co is liable to pay GST on the taxable importation that it makes. Mining Co imports the goods into Australia in carrying on its enterprise, the importation is a taxable importation and it is registered for GST. Therefore, Mining Co makes a creditable importation and is entitled to an input tax credit.

184. As Mining Co imports the goods into Australia, the supply by Korean Co to Hardy Co is not connected with Australia. Subsection 9-25(3) is not satisfied. The supplier, Korean Co, neither imports the goods into Australia nor installs or assembles the goods in Australia.

185. If, though, Hardy Co were to make the taxable importation by entering the goods for home consumption, for instance if the contract was on DDP terms, the supply of the equipment by Hardy Co to Mining Co would be a taxable supply. This supply is connected with Australia under subsection 9-25(3), because the supply involves the goods being brought to Australia and the supplier, Hardy Co, imports the goods. Hardy Co must pay the GST on the taxable supply that it makes to Mining Co. An input tax credit is available to Mining Co in respect of the acquisition, if its acquisition from Hardy Co is a creditable acquisition.

186. Hardy Co is also liable to pay GST on the taxable importation that it makes. Hardy Co imports the goods into Australia in carrying on its enterprise, the importation is a taxable importation and it is registered. An input tax credit is therefore available to Hardy Co for the GST paid on the importation, provided the other requirements for a creditable importation are satisfied.

187. As Hardy Co imports the goods into Australia, the supply by Korean Co to Hardy Co is not connected with Australia. Subsection 9-25(3) is not satisfied. The supplier, Korean Co, neither imports the goods into Australia nor installs or assembles the goods in Australia.

Applying the reasoning in paragraph 182 of GSTR 2003/15 (i.e. where the recipient of the supply (Mining Co) enters the goods for home consumption) to the present case, Technical Projects decided that subsection 9-25(1) does not apply to make the supply of the Products to Entity A connected with Australia because the Products are not in Australia when the arrangement for the supply is made and the Agreement requires Entity A to complete the process of importing the Products into Australia.

Australian Customs and Border Protection Service's website:

The Australian Customs and Border Protection Service's website states that a supply of goods held in bond in Australia is connected with Australia pursuant to subsection 9-25(1) of the GST Act:

Is a supply of goods in bond a taxable supply?

Yes. The sale of imported goods in bond is a taxable supply. All four criteria for a taxable supply (GST Act s9-5) are met. In particular, the supply is connected with Australia pursuant 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'). The goods are made available to the purchaser by the supplier. The purchaser can take delivery of the goods once they have entered the goods for home consumption ex warehouse and obtained an authority to deal from Customs.

For the same reasons, supplies of excisable goods in bond are also taxable supplies. The intention of the GST Act is apparent in Division 108 ('Valuation of taxable supplies of goods in bond').

The supplier, as with any taxable supply, will need to charge GST on taxable supplies in bond and remit this GST to the ATO. [Note: There are special valuation rules for excisable goods sold in bond to unregistered recipients - see GST Act Division 108.]

The recipient of the supply may be entitled to an input tax credit for the GST included in the price they pay to the supplier. That recipient will need to clear the goods from the bonded warehouse. They can do this a number of ways, including:

· entry for home consumption ex warehouse [For imported goods (Nature 30 entry) this is a taxable importation and GST is payable to Customs. The owner may be entitled to an input tax credit. For excisable goods (Nature 40) this is not a taxable importation and, therefore, no GST is payable]

· export the goods

· move the goods under bond to another Customs warehouse.

Technical Projects considers that this advice concerns a case where the supplier completes the N20 to enter the goods into bond and is therefore distinguishable from the present case where Entity A completes both the N20 and N30.

All GST rulings and publications referred to above are available at the ATO website www.ato.gov.au