Edited version of your written advice

Authorisation Number: 1051186582875

Date of advice: 7 February 2017

Ruling

Subject: Goods and services tax (GST) importation of car parts

Question 1

Is GST payable on your supply of promotional and selling services to the overseas non-resident vendors?

Answer

No.

Question 2

Are you liable for GST on the sale of motor vehicle parts from overseas non-resident vendors to Australian private consumers where you find the buyers?

Answer

You are liable for GST on the sale of motor vehicle parts from overseas non-resident vendors to Australian private consumers where:

● these sales are connected with Australia; and

● the vendors are registered or required to be registered for GST; and

● you sell the parts in an agency capacity on behalf of the overseas non-resident vendors,

unless certain exclusions apply (more detailed information would be needed to determine if these exclusions apply).

You will not have a GST liability on sales by overseas non-resident vendors where you are not selling the parts in an agency capacity on their behalf.

See reasons for decisions for more guidance.

Question 3

Are you liable for GST on the importation of motor vehicle parts sold by overseas non-resident vendors to Australian private consumers where you are not involved in the importation?

Answer

No.

Relevant facts and circumstances

You are registered for GST.

You operate a business in Australia.

You will promote motor vehicle parts and components of overseas non-resident vendors to private consumers in the Australian market and find buyers. The vendors will include your overseas parent company. The vendors will be in the business of selling such goods. You will not buy and on-sell the parts in your own right or own the goods at any point. You will just be providing sales and marketing services to overseas non-resident vendors in return for a commission. It has not been decided yet whether you will have the authority to enter into contracts to sell parts as a common law agent on behalf of overseas non-resident vendors, thereby binding the vendors to sell parts to Australian buyers.

The vendors will send the goods to Australia to meet the orders. You will not be involved in importing the goods or clearing them through Australian customs. Either the vendor or the purchaser may clear the goods through Australian customs.

The vendor may or may not be registered for GST and may or may not make $75,000 or more of car part sales to Australian buyers in a year.

The price of a car part transaction could be $1,000, less than $1,000 or more than $1,000.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 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 section 9-27

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

A New Tax System (Goods and Services Tax) Act 1999 section 13-15

A New Tax System (Goods and Services Tax) Act 1999 section 13-20

A New Tax System (Goods and Services Tax) Act 1999 section 38-190

A New Tax System (Goods and Services Tax) Act 1999 Part 3-2

A New Tax System (Goods and Services Tax) Act 1999 section 57-5

A New Tax System (Goods and Services Tax) Act 1999 section 83-5

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

Reasons for decisions

Question 1

Summary

You will make GST-free supplies of services to non-residents who are not in Australia, pursuant to Item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Detailed reasoning

GST is payable on any taxable supply that you make.

Generally, the supplier of a taxable supply has the GST liability on the supply, but there are special exceptions to this rule.

You make a taxable supply if you meet the requirements of section 9-5 of the GST Act, which 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 the indirect tax zone; 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 term defined in section 195-1 of the GST Act)

The 'indirect tax zone' is Australia.

You meet the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. That is:

● you will supply promotional and selling services in return for consideration (the commissions)

● you will supply these services in the course or furtherance of an enterprise you carry on

● these supplies will be connected with Australia, and

● you are registered for GST.

There are no provisions of the GST Act under which your supplies of the services will be input taxed. Therefore, what remains to be determined is whether your supplies of these services will be GST-free.

In accordance with Item 2 in the table in subsection 38-190(1) of the GST Act (Item 2), a supply of something other than goods or real property is GST-free if the supply is made to a non-resident who is not in Australian when the thing supplied is done and:

(a) the supply is neither a supply of work physically performed on goods situated in Australia when the work is done nor a supply directly connected with real property situated in Australia; or

(b) the *non-resident acquires the thing in *carrying no the non-resident's *enterprise, but is not *registered or *required to be registered.

There is an exclusion in subsection 38-190(3) of the GST Act where the relevant supply is provided to a third party in Australia (with some exceptions). There are also some other exclusions, which are not relevant to the situation in question.

You will supply promotional and selling services, which are not goods or real property.

A non-resident recipient will not be 'in Australia' for the purposes of item 2 if they are not 'in Australia in relation to the supply' (this concept is explained in Goods and Services Tax Ruling GSTR 2004/7).

You will supply your services to overseas non-resident vendors.

In accordance with paragraph 35 of GSTR 2004/7, where you supply selling services to overseas non-resident individuals, such vendors will not be in Australia for the purposes of item 2.

In accordance with paragraph 375 of GSTR 2004/7 even if a vendor, which is a company, is considered to be in Australia by virtue of carrying on a business in Australia through another entity - you (if applicable), they will not be in Australia 'in relation to your supply' of services to them.

Additionally, your supplies of services will neither be supplies of work physically performed on goods situated in Australia when the work is done nor supplies directly connected with real property situated in Australia.

The exclusions from GST treatment don't apply.

Therefore, your supplies of selling services to overseas non-resident vendors will be GST-free under item 2.

Hence, GST will not be payable on the selling agency services you supply to overseas non-residents.

Question 2

Summary

You are liable for GST on the sale of motor vehicle parts from overseas non-resident vendors to Australian private consumers where:

● these sales are connected with Australia; and

● the vendors are registered or required to be registered for GST; and

● you sell the parts in an agency capacity on behalf of the overseas non-resident vendors,

unless certain exclusions apply (more detailed information would be needed to determine if these exclusions apply).

This is because under such circumstances, the requirements of section 9-5 of the GST Act would be met and a special rule in section 57-5 of the GST Act dealing with sales made by non-resident vendors through resident agents would impose the GST liability on you.

You will not have a GST liability on sales by overseas non-resident vendors where you are not selling the parts in an agency capacity on their behalf as you would not be the supplier of the goods and section 57-5 of the GST Act would not apply under such circumstances.

Detailed reasoning

Where commercial overseas non-resident vendors sell car parts to Australian customers and the vendors send the goods to Australia, the vendors meet the requirements of paragraphs 9-5(a) and 9-5(b) of the GST Act. That is:

● they sell the parts for consideration, and

● they supply the parts in the course or furtherance on an enterprise that they carry on.

There are no provisions of the GST Act under which these sales are GST-free or input taxed. Therefore, GST is payable on the sales of the parts if the supplies are connected with Australia and the vendors are registered or required to be registered for GST. The GST liability, if any, on a sale is 1/11^th of the sale price.

Connected with Australia

In accordance with subsection 9-25(3) of the GST Act, a supply of goods that involves the goods being brought to the indirect tax zone (Australia) is connected with the indirect tax zone if the supplier imports the goods into the indirect tax zone.

In accordance with paragraph 142 of Goods and Services Tax Ruling GSTR 2003/15, we consider that the importer of goods is the entity that not only causes the goods to be brought to Australia for their own purposes, but also completes the Australian customs formalities.

In accordance with paragraph 143 of GSTR 2003/15 an overseas vendor who sends goods to Australia to meet an order is considered to be causing the goods to be brought to Australia for their own purposes (meeting the order). The purchaser is also considered to be causing the goods to be brought to Australia for their own purposes by ordering the goods.

Therefore, where an overseas vendor of car parts sends parts to Australia to meet an order and it clears the goods through Australian customs, it will be regarded as the importer. Hence, the sale of the parts under such circumstances is connected with Australia.

Where the purchaser clears the goods through Australian customs, the purchaser is considered the importer and therefore, the sale is not connected with Australia under such circumstances.

Where the goods are sent by mail to a recipient in Australia, the recipient is considered the importer, and therefore, the sale is not connected with Australia under such circumstances.

Registered or required to be registered for GST

In accordance with section 23-10 of the GST Act, any entity that carries on an enterprise is entitled to register for GST. Commercial overseas non-resident vendors of car parts are entitled to be registered for GST because they are carrying on an enterprise.

In accordance with section 23-5 of the GST Act, an entity is required to be registered for GST if:

(a) the entity is carrying on an enterprise; and

(b) the GST turnover meets the registration turnover threshold of $75,000.

Only supplies that are connected with Australia are included in GST turnover.

Where an overseas vendor of motor vehicle parts sells goods to Australian customers and the vendor sends the goods to Australia, the vendor will be required to be registered for GST if their turnover from selling the parts that they clear through Australian customs is $75,000 or more a year or projected to be $75,000 or more a year. If the vendor is making any other supplies that are connected with Australia, such supplies would also generally need to be included in the GST turnover calculation for the purposes of determining if the compulsory GST registration threshold is met. See Goods and Services Tax Ruling GSTR 2001/7 for more information.

Supplies made by non-resident entities through resident agents

If certain requirements are met, the GST payable on a taxable supply made by a non-resident through a resident agent is payable by the agent instead of the non-resident.

Section 57-5 of the GST Act states:

(1) GST payable on a * taxable supply or * taxable importation made by a *non-resident

through a * resident agent:

(a)  is payable by the agent; and

(b)  is not payable by the non-resident.

(2)  This section has effect despite sections 9-40 and 13-15 (which are about liability

for GST).

(3)  However, this section does not apply to a * taxable supply if:

(a)  apart from this section, the * non-resident would not be liable to pay GST

on the supply; or

(b) the non-resident makes the supply through an * enterprise that the

non-resident * carries on in the indirect tax zone.

A resident agent for the purposes of paragraph 57-5(1)(a) of the GST Act means a resident entity that is a common law agent, that is, the resident entity has the authority to enter into sale contracts on behalf of a non-resident supplier thereby binding the supplier to make supplies to third parties.

Where the supply by the non-resident entity is a supply of goods, paragraph 57-5(3)(a) of the GST Act could only potentially apply where:

● the non-resident entity is an incapacitated entity (that is, it is bankrupt or insolvent or something similar and an insolvency professional such as a liquidator etc is managing their business); or

● the non-resident entity does not make the supply through an enterprise it carries on in Australia and the non-resident entity and purchaser agree that the non-resident's GST liability is reverse charged to the purchaser under section 83-5 of the GST Act (and the requirements for reverse charging under that provision are met).

Where the overseas non-resident entity makes a supply through an enterprise that the non-resident carries on in Australia, the exception at paragraph 57-5(3)(b) of the GST Act applies.

Section 9-27 of the GST Act defines 'enterprise of an entity carried on in Australia' (type in GST Act into an internet search engine).

Under section 9-27 of the GST Act, one of the requirements for an entity to be regarded as carrying on an enterprise in Australia is that there is a fixed place in Australia through which an enterprise is carried on or alternatively an enterprise has been carried on, or is intended to be carried on, in Australia for more than 183 days in a 12 month period.

An overseas non-resident entity can carry on an enterprise in Australia through a business establishment/operation of its own in Australia or through another entity - a common law agent which has a business establishment, or carries on an operation, in Australia.

It is possible for an overseas non-resident entity to carry on an enterprise in Australia through an agent, for the purposes of section 9-27 of the GST Act if both of the following circumstances are present:

● the agent habitually exercises authority to conclude contracts on behalf of the overseas non-resident entity; and

● the agent is not a broker, general commission agent or other agent of independent status that is acting in the ordinary course of the agent's business as such an agent.

The fact that an overseas non-resident entity makes supplies through a resident common law agent will not in itself mean that the non-resident entity is considered to be carrying on an enterprise in Australia.

The overseas non-resident vendors in your case would not be carrying on an enterprise in Australia through you if you are not a common law agent.

If you are a common law agent of the overseas non-resident vendors, but you do not habitually exercise authority to conclude contracts on their behalf, they would not be carrying on enterprises in Australia through you as agent.

If you are an independent common law agent of the overseas non-resident vendors, and you supply your selling agency services in the ordinary course of your business as a common law agent, the overseas non-resident vendors would not be carrying on enterprises in Australia through you as agent.

You will not supply your selling services exclusively to a single vendor. Therefore, if you act as a common law agent for the vendors, you will be an independent agent. Hence, if you are a common law agent and you supply agency services in the ordinary course of your business as common law agent for the vendors, the vendors will not be carrying on enterprises in Australia through you as agent (in accordance with subparagraph 9-27(3)(c)(ii) of the GST Act).

Where you do not have the authority to enter into sale of parts contracts as a common law agent on behalf of vendors, thereby binding the vendors to sell parts, the vendors will have the GST liabilities, where applicable, unless:

● they are insolvent etc and the GST liabilities are shifted to the insolvency professional that is managing the affairs of the vendor due to certain special rules in the GST Act regarding insolvent entities; or

● the vendor does not make the supply through an enterprise it carries on in Australia and the vendor and purchaser agree that the vendor's GST liability is reverse charged to the purchaser under section 83-5 of the GST Act (and the requirements for reverse charging under that provision are met).

A vendor will also have the GST liabilities on their sales if they are carrying on their enterprise in Australia through you unless they are insolvent etc and the GST liabilities are shifted to the insolvency professional that is managing the affairs of the vendor due to certain special rules in the GST Act.

If you have authority to enter into sale transactions on behalf of overseas non-resident vendors, which you exercise, and the vendors are not carrying on enterprises in Australia through you, you will be liable to pay GST to the ATO on any taxable supplies of motor vehicle parts that the overseas non-resident vendors make through you (presuming that the special rules for incapacitated entities do not apply).

Question 3

Summary

As you are not a party that will enter the goods for home consumption you will not have the GST liability, if any, on the importation of the parts.

Detailed reasoning

GST is payable on taxable importations.

You make a taxable importation if you meet the requirements of subsection 13-5(1) of the GST Act which states:

You make a taxable importation if:

(a) the 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.

Additionally, a consignment of goods that are sent by post; which have a value not exceeding $1,000 and are delivered into home consumption in accordance with an authorisation under section 71 of the Customs Act 1901 are taxable under section 114-5 of the GST Act unless they are non-taxable importations.

Also, a consignment of goods that are consigned otherwise than by post and that are all transported to Australia in the same ship or aircraft and that have a value not exceeding $250 and which are delivered into home consumption in accordance with an authorisation under section 71 of the Customs Act 1901 are taxable under section 114-5 of the GST Act unless they are non-taxable importations.

Where motor vehicle parts are imported, the requirement of paragraph 13-5(1)(a) of the GST Act is met.

Motor vehicle parts will be required to be entered for home consumption except where

● the goods are included in a consignment consigned through the Post Office and the goods have a value not exceeding $1,000; or

● the goods are included in a consignment consigned otherwise than by post and they are all transported to Australia in the same ship or aircraft; and they have a value not exceeding $250.

The entity that enters the goods through home consumption (where applicable) will meet the requirement of paragraph 13-5(1)(b) of the GST Act.

Therefore, a consignment of motor vehicle parts that are entered for home consumption would be taxable under section 13-5 of the GST Act unless it is a non-taxable importation.

A consignment of motor vehicle parts that are sent by post; which have a value not exceeding $1,000 and are delivered into home consumption in accordance with an authorisation under section 71 of the Customs Act 1901 would be taxable under section 114-5 of the GST Act if they were not non-taxable importations.

A consignment of motor vehicle parts consigned otherwise than by post and that are all transported to Australia in the same ship or aircraft and that have a value not exceeding $250 and which are delivered into home consumption in accordance with an authorisation under section 71 of the Customs Act 1901 would be taxable under section 114-5 of the GST Act if they were not non-taxable importations.

Therefore, what remains to be determined is whether the importation of motor vehicle parts are non-taxable importations.

Section 13-10 of the GST Act defines non-taxable importations. It states:

An importation is a non-taxable importation if:

(a) it is a non-taxable importation under Part 3-2.; or

(b) it would have been a supply that was *GST-free or *input taxed

if it had been a supply.

If the importation of the motor vehicle parts had been supplies, these supplies would not have been GST-free or input taxed. Therefore, the importation of the motor vehicle parts are not non-taxable importations under paragraph 13-10(b) of the GST Act.

The relevant provisions in Part 3-2 of the GST Act are subsection 42-5(1) of the GST Act and subsection 42-5(1C) of the GST Act.

Subsection 42-5(1) of the GST Act states:

An importation is a non-taxable importation if the goods are covered by item 4, 10, 11, 15, 18, 21, 21A, 23, 24, 25, 26 or 27 in Schedule 4 to the Customs Tariff Act 1995.

Subsection 42-5(1C) of the GST Act states:

(a) An importation of goods is a non-taxable importation if the goods are covered by item 1, 3, 7, 12, 13 or 29 in Schedule 4 to the Customs Tariff Act 1995; and

(b) regulations made for the purposes of this subsection.

Item 26 in Schedule 4 to the Customs Tariff Act 1995 is low value goods (goods with a value of $1,000 or less). Tobacco, alcohol and bulk ordered goods are excluded from this concession. This exemption will apply to the importation of motor vehicle parts where the value of the consignment is $1,000 or less. Where goods are ordered together (which is considered a single consignment) but shipped separately, and the total of value of the goods is over $1,000, the low value goods concession will not apply.

No other GST exemptions apply to the importation of the motor vehicle parts.

Therefore, GST will be payable on the importation of motor vehicle parts unless the low value goods concession applies (the consignment has a value of $1,000 or less).

The entity that enters the goods for home consumption (where applicable) has the GST liability, if any, on the taxable importation of the car parts.

The vendor of the motor vehicle parts will be liable to pay the GST, if any, to customs if they enter the goods for home consumption.

The purchaser will be liable to pay the GST, if any, to Customs if they enter the goods for home consumption.

As you are not a party that will enter the goods for home consumption you will not have the GST liability, if any, on the importation of the parts.

Calculating the GST on an importation

In accordance with section 13-20 of the GST Act, the GST payable on a taxable importation is 10% of the value of the taxable importation.

The value of a taxable importation is the sum of:

● the customs value of the goods (the customs value is the price the Australian buyer bought the goods for including any amount the vendor has embedded in the price of the goods to cover transport and insurance)

● any customs duty payable

● the amount paid or payable to transport the goods to their place of consignment in Australia (where this amount is not already included in the customs value)

● the insurance cost for that transport (where this amount is not already included in the customs value

● any wine tax payable.

The person making the taxable importation has the option of treating the transport and insurance components in combination as being 10% of the customs value (where the transport and insurance cost is not already included in the customs value).