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Edited version of your written advice
Authorisation Number: 1051372288022
Date of advice: 11 May 2018
Ruling
Subject: GST and supply of services to a non-resident
Question 1
Is the sale of the goods by Company Z to the Australian customer a taxable supply?
Answer
No. The sale of the goods by Company Z to the Australian customer is not a taxable supply.
Is Company Z liable to pay GST on the importation of the goods?
Answer
No. Company Z is not liable to pay GST on the importation of the goods
Relevant facts and circumstances
A manufacturing entity (the manufacturer) overseas manufactures the goods and exports them from outside Australia. The manufacturer is nominated as the exporter of the goods on the relevant customs documentation and arranges for export clearance overseas.
Company X, an overseas entity, purchases the goods from the manufacturer under a sale agreement where the terms of trade are Free-on-Board (FOB). Legal title to the goods and all attendant risks are transferred from the manufacturer to Company X while the goods are on board the vessel.
Subsequently, Company X sells the goods to Company Y, under an FOB incoterm in the sale agreement. Legal title to the goods and all attendant risks are transferred from Company X to Company Y while the goods are on board the vessel.
Company Y then sells the goods to Company Z. Company Z is a private company incorporated in Australia and registered for GST. Legal title to the goods and all associated risks pass from Company Y to Company Z under an FOB incoterm in the sale agreement. Legal title passes from Company Y to Company Z while the goods are situated on the vessel and before the vessel enters Australia.
Furthermore, Company Z enters into a sale contract with its Australian customer to supply the goods.
Under the sale contract between Company Z and the Australian customer, legal title to the goods and all attendant risks pass from Company Z to the Australian customer under an FOB incoterm. Legal title passes while the goods are situated on the vessel and the vessel is outside Australia.
The Australian customer retains legal ownership of the goods while the goods are located outside Australia. Under the sale agreement, the Australian customer is the importer of record and lodges an import declaration in its own name with Australian Customs.
The goods being brought to Australia by the Australian customer do not involve Company Z undertaking an installation or assembly of the goods whilst 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 section 9-25
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
Reasons for decision
1. GST is payable on a taxable supply.
Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (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 the indirect tax zone; and
(d) you are *registered, o *required to be registered.
However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.
For the purpose of paragraph 9-5(c) of the GST Act, subsection 9-25(3) provides that a supply of goods that involves the goods being brought to the indirect tax zone is connected with the indirect tax zone if the supplier imports the goods into the indirect tax zone.
According to the facts, the Australian customer is the importer of record and lodges the import declaration in its own name. Therefore, the Australian customer imports the goods.
As the recipient, rather than the supplier, imports the goods into the indirect tax zone, the supply of the goods is not connected with the indirect tax zone.
Accordingly, the sale of the goods by Company Z to the Australian customer is not a taxable supply.
2. GST is payable on a taxable importation.
Section 13-5 of the GST Act states:
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.
Paragraph 13-5(a) of the GST Act is satisfied as the goods are imported.
For the purpose of paragraph 13-5(b), goods are entered for home consumption by lodging an import entry in the name of the owner. Typically, the ‘owner’ that enters the 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.
In this case, the Australian customer retains ownership of the goods while the goods are outside Australia and lodges the import declaration under its own name. The Australian customer enters the goods for home consumption. Therefore, paragraph 13-5(b) is not satisfied as Company Z does not enter the goods for home consumption.
Accordingly, Company Z does not make a taxable importation and is not liable to pay GST on the importation of the goods.