Edited version of your private ruling

Authorisation Number: 1012444651252

Ruling

Subject: GST and imports

Question 1

Is your supply of goods imported from overseas through international post to a customer in Australia subject to goods and services tax (GST)?

Answer

No. Your supply of goods imported from overseas through international post to a customer in Australia is not subject to GST.

Question 2

Is the on-charge of the freight costs for goods that you deliver from overseas to your customers in Australia subject to GST?

Answer

No. The on-charge of the freight costs for goods that you deliver from overseas to your customers in Australia is not subject to GST.

Relevant facts and circumstances

You are an overseas entity and are registered for GST in Australia.

You receive orders from customers by email, phone or fax.

You have an agent in Australia who collates orders from your Australian customers and pass on these orders to you.

You deliver the goods by international post from overseas directly to customers in Australia.

You are not declared as 'owner' within the meaning of the Customs Act 1901 in the delivery of goods to your Australian customers.

The value of each consignment/order is below AUD$1,000.

The freight charge you pass on to customers is a variable amount dependent on the weight of the order you are dispatching. However, you cannot always pass the full amount onto a customer.

Your customers do not have a genuine choice under the contract about whether you deliver the goods.

You do not install or assemble the goods in Australia.

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 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 Item 2 in the table of subsection 114-5(1)

A New Tax System (Goods and Services Tax) Act 1999 Section 15-5

Reasons for decision

Question 1

Is your supply of goods imported from overseas through international post to a customer in Australia subject to goods and services tax (GST)?

Summary

No, your supply of goods imported from overseas through international post to a customer in Australia is not subject to GST. The supply is not connected with Australia, as the addressee imports the goods. Therefore, your supply of goods is not a taxable supply.

Detailed reasoning

GST is payable on taxable supplies. For the supply of your goods to be a taxable supply, all the requirements listed in section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) must be satisfied.

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.

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

Based on the information provided, you have satisfied paragraphs 9-5(a), 9-5(b) and 9-5(d) of the GST Act as follows:

· your supply of goods is made for consideration

· the supply is made in the course of the enterprise that you carry on, and

· you are registered for GST.

There are no provisions in the GST Act or any other Acts for the supply of your goods to the Australian customers to be GST-free or input taxed. Therefore, what remains to be considered is whether your supply of goods is connected with Australia under section 9-25 of the GST Act.

Section 9-25 of the GST Act outlines when a supply is connected with Australia. In determining whether a supply of goods is connected with Australia, a distinction is made between supplies of goods wholly within Australia and supplies of goods to Australia. 

Supplies of goods to Australia

Subsection 9-25(3) of the GST Act discusses when a supply of goods to Australia is connected with Australia.

Goods and Services Tax Ruling GST 2003/15 'Goods and services tax: importation of goods into Australia' explains the ATO view on subsection 9-25(3) of the GST Act.

As expressed at paragraph 139 in GSTR 2003/15:

139. A supply of goods is connected with Australia if that supply involves the goods being brought to Australia and the supplier either:

(a) imports the goods into Australia (paragraph 9-25(3)(a)); or

(b) installs or assembles the goods in Australia (paragraph 9-25(3)(b)).

Therefore, it is important to determine whether you are the entity that imports the goods, as you do not install or assemble the goods in Australia.

Paragraphs 72 and 73 of GSTR 2003/15 express the ATO view on whether the supplier imports the goods for the purposes of subsection 9-25(3) of the GST Act.

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.

Accordingly, an entity that imports goods is the entity that: 

· causes the goods to be brought to Australia for consumption by way of supplying, using or otherwise applying them to some use by that entity after importation; and  

· completes the customs formalities for the entry of the goods.  

The entity that causes goods to be brought to Australia is identified by looking to the purpose for which the goods are brought here. The entity whose purpose it is to apply the goods by way of supply, use or other application to its purpose after importation is the entity that causes the goods to be brought to Australia. 

On the basis of the facts provided, both you and your customer cause the goods to be brought to Australia. You cause the goods to be brought to Australia when you send the goods to Australia for sale. Your customer also causes the goods to be brought to Australia by placing an order with you to send the goods to Australia.

In circumstances where there are several parties that cause the goods to be brought to Australia (for example: seller and buyer), it is usual for the parties to agree which party takes responsibility for the completion of the customs entry formalities and entry of the goods for home consumption. It is this entity that imports the goods.  However, you send low value consignments from overseas by post to Australia. These consignments are imported without entry for home consumption.

As expressed in paragraph 58 of GSTR 2003/15:

58. In certain circumstances, taxable importations are made without an entry for home consumption. This occurs where the circumstances set out in the table in subsection 114-5 are met. The entity in the fourth column of the table, under the heading 'Importer', is the entity that makes the taxable importation. For these taxable importations, we consider that this entity is also the entity that imports the goods within the meaning of section 15-5.

Item 2 in the table of subsection 114-5(1) of the GST Act identifies the entity that makes a taxable importations for low value consignments by post. Under the heading 'importer' in the fourth column of item 2 in the table of subsection 114-5(1) of GST Act, this is 'the person to whom the authorisation was granted' under section 71 of the Customs Act 1901.

We consider that this is the entity who also imports the goods for determining when a supply is connected with Australia under subsection 9-25(3) of the GST Act. In your case, the person to whom the authorisation is granted is the addressee.

Therefore, the supply of goods is not connected with Australia under subsection 9-25(3) of the GST Act as it is the addressee, and not you that imports the goods.

Supplies of goods wholly within Australia 

Subsection 9-25(1) of the GST Act 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 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. '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. Both 'delivered' and 'made available' look at the place where the goods are at the relevant time.

Goods and Services Tax Ruling GSTR 2000/31 'Goods and services tax: supplies connected with Australia' discusses when goods are 'delivered, or made available' in Australia to the recipient of the supply under subsection 9-25(1) of the GST Act.

GSTR 2001/31 provides that a supply of goods is connected with Australia under subsection 9-25(1) of the GST Act if an overseas supplier acquires goods in Australia and supplies those goods to the recipient in Australia.

However, as expressed at paragraph 49 of GSTR 2000/31:

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.

As previously discussed, it is the recipient, as the addressee, who imports the goods into Australia. Your supply of goods is also not connected with Australia under subsection 9-25(1) of the GST Act.

As your supply of goods is not connected with Australia under either subsection 9-25(1) and subsection 9-25(3) of the GST Act, it is not a taxable supply under section 9-5 of the GST Act. GST is not payable on the supply of the goods.

Question 2

Is the on-charge of the freight costs for goods that you deliver from overseas to your customers in Australia subject to GST?

Summary

No. The on-charge of the freight costs for goods that you deliver from overseas to your customers in Australia is not subject to GST.

Detailed reasoning

In determining the GST implications on the freight costs that you pass onto the Australian customers for the supply of your goods, we need to consider whether the delivery service forms part of the supply of your goods or whether it is a separately identifiable part of the supply.

If delivery is a separately identifiable part of the supply, its GST treatment is determined separately from the supply of the goods. Your supply which is composed of the supply of goods and the delivery can become a mixed supply. A mixed supply is a supply that is made up of taxable and non-taxable parts.

If delivery is an integral, ancillary or incidental part of the supply of the goods, the supply is referred to as a composite supply. A composite supply is a supply where there is a dominant part of a supply and subordinate parts that compliment the dominant part. A composite supply is essentially the provision of one thing and the GST status of that thing depends on the GST status of the dominant part.

Goods and Services Tax Ruling GSTR 2001/8 'Goods and services tax: Apportioning the consideration for a supply that includes taxable and non-taxable parts' describes the characteristics of a mixed supply and a composite supply. Paragraph 59 of GSTR 2001/8 states:

59. No single factor (by itself) will provide the sole test you use to determine whether a part of a supply is integral, ancillary or incidental to the dominant part of the supply. Having regard to all the circumstances, and taking a commonsense and practical approach, indicators that a part may be integral, ancillary or incidental include where:

· you would reasonably conclude that it is a means of better enjoying the dominant thing supplied, rather than constituting for customers an aim in itself; or

· it represents a marginal proportion of the total value of the package compared to the dominant part; or

· it is necessary or contributes to the supply as a whole, but cannot be identified as the dominant part of the supply; or

· it contributes to the proper performance of the contract to supply the dominant part.

Goods and Services Tax Determination GSTD 2002/3 'how do I account for GST when I supply taxable goods, non-taxable goods and delivery services together?' explains when delivery services are a separately identifiable part or integral, ancillary or incidental to the dominant supply of goods.

GSTD 2002/3 provides that delivery is a separately identifiable part of a mixed supply where it is significant and could realistically be made as a separate supply. A delivery service is significant where it is an aim in itself. That is, your customers have a genuine choice under the contract about whether you deliver their goods. Such a choice is indicated where:

· your customers are not obliged to use your delivery service; and

· you provide reasonable access, at no extra charge, to customers who choose to make their own arrangements to collect the goods.

Paragraph 4 of GSTD 2002/3 further states:

4. You supply delivered goods where the delivery is integral, ancillary or incidental to the supply of the goods. This will be a composite supply. In these cases, you contract to supply delivered goods only, and not a delivery service in addition to the goods. The delivery is necessary for your customer to enjoy the goods. It is not an end in itself, but merely contributes to the proper performance of the contract to supply the goods. That is, to fulfil the contract for the supply of the goods, the supplier has to deliver them and remains responsible for them until they are delivered. Identifying a separate charge for delivery does not, by itself, mean that the delivery is a significant part of the supply.

Based on the facts provided, you are required to deliver the goods to your customers in Australia when they order goods from you. You do not give your customers a choice under the agreement about whether you deliver the goods.

Accordingly, the delivery is integral, ancillary or incidental to the dominant part that is the supply of your goods. The supply that you make is a composite supply of delivered goods.

A composite supply is treated as a supply of a single thing. If the dominant part of the supply is taxable, then GST is payable on the whole supply. The delivery forms part of the composite supply of the goods that you make to your Australian customers. If the supply of your goods is taxable, then GST is payable on the whole supply. If the supply is non-taxable, then no GST is payable on the whole supply.

As previously discussed, your supply of goods to your customers in Australia is not a taxable supply under section 9-5 of the GST Act and GST is not payable on the supply. As the delivery forms part of a composite supply of the goods, the freight costs on-charged is also not subject to GST.