Edited version of your written advice

Authorisation Number: 1051185612578

Date of advice: 31 January 2017

Ruling

Subject: GST and supply of goods that are brought to Australia

Question 1

Based on the information received, have you made a taxable importation for the purposes of section 13-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when the goods are entered into Australia?

Advice

No. Based on the information received, you have not made a taxable importation for the purposes of section 13-5 of the GST Act when the goods are entered into Australia because you did not import the goods.

Question 2

Is your supply of goods a taxable supply under section 9-5 of the GST Act where the goods are brought to Australia and imported by the Australian purchaser?

Advice

No. Based on the information received, your supply of goods is not a taxable supply under section 9-5 of the GST Act where the goods are brought to Australia and imported by the Australian purchaser because the supply of goods is not connected with Australia and therefore outside the scope of the GST law.

Relevant facts

You are registered for the goods and services tax (GST) and your core business is the sourcing of and sales of goods.

You contract with an overseas company for the sale and purchase of goods. You are the buyer and the overseas company is the seller of the goods. The purchased goods are transported to Australia by sea from overseas and sold to you under the Incoterms 'CFR'. This means that the overseas company is responsible for the costs of freight and insurance of the goods from overseas to the Australian port of destination.

Before reaching Australian territorial seas, you contract with an unrelated third party who is an Australian company for the sale of your purchased goods to that Australian company (Australian purchaser). The shipping arrangement for the sale of your purchased goods to the Australian purchaser is under the Incoterms “CIF”. This means the buyer is responsible for all costs associated with the unloading of the goods at the port destination and clearing the goods for import.

When the goods arrive to Australia, the Australian purchaser completes the formalities for the importation of the goods, clears the goods through customs and pays the relevant duty, customs fee and taxes to Customs. You have not entered any of the goods imported into Australia for home consumption for the purposes of the Customs Act 1901.

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(3)

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

Reasons for decisions

Note: Where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in section 195-1 of the GST Act.

Question 1

Summary

You have not made a taxable importation of goods under subsection 13-5(1) of the GST Act when the goods arrived in Australia.

Detailed reasoning

Under subsection 13-5(1) of the GST Act you make a taxable importation if:

a) goods are imported; and

b) you enter the goods for home consumption (within the meaning of the Customs Act 1901).

However, the importation is not a taxable importation to the extent that it is a non-taxable importation.

Section 13-15 of the GST Act states that the entity making a taxable importation must pay the GST on the taxable importation.

Goods and Services Tax Ruling GSTR 2003/15 provides guidance on the importation of goods in Australia. In regard to taxable importation of goods in Australia under Division 13 of the GST Act, GSTR 2003/15 states the following:

Taxable importation under Division 13

29. Goods are typically imported into Australia when they are brought to Australia to be unloaded here. 'Imported' in this context has its ordinary meaning.

30. Imported goods are entered for home consumption, within the meaning of the Customs Act, by an 'owner', as defined in that Act, entering imported goods for home consumption. The imported goods are entered by lodging an import declaration in the name of the 'owner'.

31. If you, as 'owner', lodge an import declaration in your name, you enter imported goods for home consumption within the meaning of the Customs Act and you are liable to pay GST on that importation if the importation is a taxable importation.

32. Typically, the 'owner' that enters imported goods is the legal owner of the goods, or the importer, exporter, consignee, or other person with an interest in, or control of, the goods. While the 'owner' can lodge the import declaration itself, it is more likely that a licensed customs broker is engaged to prepare the import declaration on behalf of the 'owner'. In either case, the import declaration is made in the name of the 'owner' and, if it is a taxable importation, it is the owner that makes the taxable importation and is liable for GST. The customs broker does not make the taxable importation and is not liable for the GST on the taxable importation.

Payment of GST on taxable importations

109. Subsection 33-15(1) explains how and when the liability for GST on taxable importations is payable.

110. GST on taxable importations is payable by the 'importer' to Customs at the same time and place, and in the same manner, as the customs duty on the goods is payable (or would be payable if the goods were subject to customs duty).

111. 'Importer' in this context does not mean the entity that actually brings the goods, or causes them to be brought, into Australia. The liability for GST falls on the entity that makes the taxable importation. Importer, in this context, therefore, simply means the entity that makes the taxable importation and is therefore liable to pay the GST on the taxable importation. That entity is typically, but need not be, the same entity that brings the goods, or causes the goods to be brought, into Australia.

112. An importer with a GST liability may pay the amount personally or arrange for another party, such as a customs broker or an agent, to pay the amount on its behalf. Alternatively, some importers can defer GST on taxable importations and account for it directly to the Australian Taxation Office ('ATO'). For approval to defer GST, the importer must satisfy the eligibility requirements for the deferral scheme as set out in the regulations.

113. While the entity that actually imports the goods usually enters them for home consumption and pays any GST, in some cases, goods that one party imports may be entered for home consumption by another party. The fact that an entity enters goods for home consumption does not necessarily mean that it is that entity that imports the goods into Australia. Completing the customs formalities is just one part of the importation process. Identifying the entity that imports goods determines which entity may have an entitlement to input tax credits.

Meaning of 'you import goods'

141. The GST taxing structure for imports also recognises that customs formalities form part of the importation process. In the context of a taxable importation under section 13-5, the importation process includes the physical importation of the goods and the release from Customs control after lodgement of an import declaration.

142. Hence, we consider that the words 'you import goods' in their context in paragraph 15-5(a) include not only causing the goods to be brought to Australia for your own purposes, but also completing the customs formalities.

Example 2 - Supply by non-resident, acquisition by resident manufacturer

143. A non-resident supplier causes goods to be brought to Australia for the purpose of filling an order and completing a sale to an Australian manufacturer. The Australian manufacturer also causes the raw materials to be brought to Australia to use in its factory, by placing the order with the non-resident supplier. In this case, causing the goods to be brought into Australia does not of itself identify the entity that imports the goods. The entity that imports the goods in these circumstances is the entity that also completes the customs formalities and pays the GST, thus completing the importation. If the purchaser attends to the customs formalities, such as in the case of a contract on FOB or CIF terms, the purchaser is the entity that imports the goods.

From the facts given, your sale contract with the Australian purchaser is under CIF terms and the Australian purchaser completes the formalities for the importation of the goods, clears the goods through customs and pays the relevant duty, customs fee and taxes to Customs. In this instance it is the Australian purchaser that has made the taxable importation of the goods since it is the entity that imports the goods in Australia.

You therefore have not made a taxable importation for the purposes of section 13-5 of the GST Act when the goods are entered into Australia.

Question 2

Summary

You have not made a taxable supply of goods under section 9-5 of the GST Act to the Australian purchaser.

Detailed reasoning

GST is payable on a taxable supply. Under section 9-5 of the GST Act a supply is a taxable supply if:

a) the supplier makes the supply for consideration; and

b) the supply is made in the course or furtherance of an enterprise that the supplier carries on; and

c) the supply is connected with Australia; and

d) the supplier is 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 under the GST Act.

All of the above must be satisfied for your supply of goods to be a taxable supply.

From the facts given you satisfy paragraphs 9-5(a), (b) and (d) of the GST Act as you make the supply for consideration and in the course of a business that you carry on; you are registered for GST.

Paragraph 9-5(d) of the GST Act

Under subsection 9-25(3) of the GST Act, a supply of goods that involves the goods being brought to Australia is connected with Australia if the supplier imports the goods in Australia.

According to paragraph 141 in Goods and Services Tax Ruling GSTR 2000/31, 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 of the GST Act.

Based on the facts given, your supply of goods is not connected with Australia as it is the Australian purchaser that imports the goods that are brought to Australia and not you.

Your supply to the Australian purchaser is therefore not a taxable supply under section 9-5 of the GST Act. Your supply is outside the scope of the GST law.