Edited version of your written advice

Authorisation Number: 1012638884221

Ruling

Subject: GST and supply of goods connected with Australia

Question

Are you making a taxable supply when you supply goods to an Australian based customer where the goods are delivered or made available to them outside Australia?

Answer

No.

Relevant facts

You are an Australian entity that is registered for GST.

You supply components to Australian based customers. These components are sourced from Countries X and Y.

Your Australian based customer will use the component in the manufacture of their product.

Previously, you imported to Australia these components and sold them to your Australian based customers. The importation is taxable and the supply to your Australian based customer is a taxable supply.

Some of your Australian based customers are moving their manufacturing operations overseas. To continue to cater for their component requirements you intend to change your supply arrangements as follows:

• Your Australian based customer places an order for components under terms Cost Insurance Freight (CIF) - overseas port or Ex-works.

• You place an order with your overseas supplier.

• Your overseas supplier prepares the ordered goods:

• Either your Australian based customer's freight forwarder collects the good from your overseas supplier's warehouse and sends the goods to an overseas address, or you arrange with your overseas supplier to send the goods to the Australian customer's, nominated overseas port.

The Australian based customer may eventually import into Australia their finished product, including the component.

The Australian based customer pays in Australia for the components purchased from you and the payment is made.

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 195-1.

Reasons for decision

You are liable to pay the GST on any taxable supply that you make.

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) sets out the requirements of a taxable supply and it 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 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 supply of goods to be a taxable supply.

You have advised that you supply goods to an Australian based customer where the goods are delivered or made available to them outside Australia. You do not import the goods into Australia.

Based on the information you provided, you satisfy the requirements of paragraphs 9-5(a), 9-5(b) and 9-5(d) of the GST Act because you supply the goods to your Australian based customer for consideration, the supply is made in the course of an enterprise you carry on and you are registered for GST. Furthermore, the supply of the goods in the circumstances described is neither GST-free nor input taxed.

It remains to be determined whether the supply of the goods 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 under 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 provides an explanation on the importation of goods into Australia.

Supplies of goods wholly within Australia

Paragraphs 45 to 49 of GSTR 2000/31 cover the circumstances when a supply of goods is made wholly within Australia under subsection 9-25(1) of the GST Act.

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 recipient, in relation to a supply, is the entity to which the supply is made.

In the context of subsection 9-25(1) of the GST Act, 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.

Goods which are delivered or made available in Australia to the recipient may be goods that the supplier has acquired domestically or imported.

Paragraph 49 of GSTR 2000/31 provides that 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.

In your case, the terms and conditions of the supply provide that the goods are either made available to your Australian based customer from your overseas supplier's warehouse or delivered to an overseas port nominated by your Australian based customer. As the goods are neither physically delivered nor made available to your Australian based customer in Australia, the supply is not connected with Australia under subsection 9-25(1) of the GST Act.

Supplies of goods to Australia

Paragraphs 52 to 56 of GSTR 2000/31 cover the situation when a supply of goods is brought to Australia under subsection 9-25(3) of the GST Act.

The ruling provides that a supply of goods is connected with Australia under subsection 9-25(3) of the GST Act if the supply involves those goods being brought to Australia and the supplier either imports the goods into Australia or installs or assembles the goods in Australia. The import of the goods into Australia or the installation or assembly of the goods in Australia is a supply of goods to Australia.

While subsection 9-25(3) of the GST Act 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.

Paragraph 72 of GSTR 2003/15 explains that supplies of goods to Australia are connected with Australia if the supplier imports the goods. A supplier imports goods where the supplier causes the goods to be brought to Australia for its own purposes and completes the customs formalities.

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

In your case, the terms and conditions of the supply does not require you to import the goods into Australia. The goods you supply to your Australian based customer will form part of a finished product that your Australia-based customer will import into Australia.

As you are not importing the goods into Australia and you do not install or assemble the goods in Australia, subsection 9-25(3) of the GST Act is not satisfied.

Based on the information provided, the supply of goods to your Australian based customers is not connected with Australia under section 9-25 of the GST Act. As such, the requirement in paragraph 9-5(c) of the GST Act is not satisfied.

As not all the requirements of section 9-5 of the GST Act are satisfied the supply of goods to your Australian based customer where the goods are delivered or made available to them outside Australia is not a taxable supply. Hence, you are not liable to pay GST on this supply.

All publications referred to in this private ruling are available from the ATO website www.ato.gov.au