Edited version of private advice

Authorisation Number: 1051554330978

Date of advice: 24 July 2019

Ruling

Subject: GST and sale of imported goods to an Australian company

Question1

Will the Commissioner accept that the importer of the goods into Australia was Company A and Company B (as relevant) and that they are responsible for payment of the import GST to Customs and charging GST on the supply made by Company X (Applicant') to the Australian purchaser (purchaser)?

Answer

No, the Commissioner will not accept that the importer of the goods into Australia was Company A and Company B (as relevant) for the goods sold by the Applicant to the purchaser because Companies A and B did not use the imported goods for their business purposes. Companies A and B have made a taxable importation of goods when they were listed as owners of the goods in the import declarations and therefore were liable to pay the GST for the taxable importation.

No, the Commissioner will not accept that Company A and Company B will be responsible to charge GST on the sale of goods made by the Applicant to the purchaser as they are not the supplier of the goods and there is no information that indicates that the Applicant made the sales through them.

Question 2

If the answer to 1 is no, was the Applicant required to be registered for GST regarding the sales it has made under the DDP Inco terms? If yes from what date must it be registered for GST purposes?

Answer

Yes, the Applicant was required to be registered for GST under section 23-5 of the GST Act regarding the sales it has made under the DDP Inco terms .The Applicant must register for GST from December 20xx as this was the date it issued the tax invoice upon receipt of payments for the first two orders.

However the Applicant can choose to backdate the GST registration to 1 October 20xx (the month when the first importation of the goods was imported into Australia) provided the Applicant would satisfy the requirements in section 15-5 of the GST Act.

Question 3

If the Applicant is required to be registered for GST, is it entitled to recover the GST paid on the importation of the goods that were sold under the DDP Inco terms?

Answer

When the Applicant is required to be registered for GST, it is not entitled to recover the GST paid on the importation of the goods that were sold under the DDP Inco terms because it has not made a taxable importation of the goods since it was not listed as the 'owner' of the goods in the import declaration and therefore has not made a creditable importation under section 15-5 of the GST Act.

Question 4

If the answer to 3 is yes, what is the administrative process for reclaiming the import GST, given that the imports were reported under Company A and Company B's Australian Business Number ('ABN')?

Answer

Our decision for answer 3 is the Applicant cannot claim the GST paid on the taxable importations as it has not made a creditable importation under section 15-5 of the GST Act because it did not make a taxable importation.

The Applicant has advised it was a mistake made by the freight company when the ABN of Company A and Company B was used in the import declaration. There is no provision under the GST Act that allows the Commissioner to exercise his discretion when a mistake has been made on an import declaration to allow a claim of GST paid on a taxable importation.

The Department of Home Affairs (DHA) administers the importation of goods into Australia. The Applicant has advised that it has sold the goods under the DPP Inco terms and a refund will be made to Companies A and B for the GST they have paid for the taxable importation In this instance the Applicant can contact DHA regarding amendments to the import declaration so that the Applicant can be listed as owner of the imported goods.

Where amendments have been made to the import declaration and the Applicant can provide proof it has made the payments for the taxable importations it will be able to claim the GST paid on the taxable importations where it is registered for GST.

Relevant facts

Company X (Applicant), Company A and Company B are companies located outside Australia and form part of a multinational group. Company A is the parent entity of both the Applicant and Company C.

The Applicant conducts business independently and autonomously from Company A and Company B.

Company A and Company B are registered for the deferred GST and do not have any written authority regarding importing goods on behalf of the Applicant into Australia.

The Applicant is currently not registered for GST and has agreed to sell goods to an Australian company under the incoterms Delivery Duty Paid (DDP). Under the DDP incoterms, the Applicant is responsible to ship the goods, pay the relevant taxes for the importation and deliver the goods to the customer's designated place of consignment in Australia.

The applicant sold the goods to the Australian purchaser under three purchase orders ranging from July 20XX to October 20XX and the total amount would exceed A$75,000. There were five separate shipments made to the purchaser with five separate tax invoices issued with dates ranging from December 20xx to April 20xx. The goods were manufactured and packed by an overseas company then shipped to Australia. No GST was collected on these sales.

GST was paid on the taxable importation of these goods into Australia under the GST deferral account of Company A (for one importation) and Company B (for the other importations). No one has claimed GST credit for the GST paid on the taxable importations. The first taxable importation was recorded in the month of October 20XX.

The use of company's A and B's ABN in the import declaration was simply an administrative error.Regarding the payment of the GST by company A and Company B an intercompany payable to Company A has been recorded in the Applicant's accounts and a timely payment is expected to be made.

To date there has been no change to the import declaration or the bill of lading.

Aside from the five DDP sales, all other sales by the Applicant were made under different incoterms, where the customer was the importer of record.

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 15-5

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

A New Tax System (Goods and Services Tax) Act 1999 section 23-5

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

A New Tax System (Goods and Services Tax) Act 1999 Division 188

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.

Detailed reasoning

Question 1

The importation of goods into Australia and the taxable sales of goods are under different provisions in the GST Act. We therefore need to consider these provisions in order to determine whether Companies A and B are the importer of the goods that were sold to the purchaser and whether both Companies have made taxable sales of the imported goods to the Australian purchaser.

Are Companies A and B the importer of the goods sold to the purchaser?

The Fact Sheet 'claiming GST credits for goods you import' provides guidance when you are an 'importer' of goods. The fact sheet states the following:

If you are seeking to claim a GST credit for the GST you were liable to pay on a taxable importation, you must be the importer of the goods and import the goods solely or partly for a creditable purpose.

Even if your name appears as 'owner' on the import declaration, this may not mean you are the importer for the purpose of claiming a GST credit on the taxable importation.

There are some situations where you are liable to pay the GST on a taxable importation, but you are not entitled to claim the corresponding GST credit.

Importer for the purpose of claiming GST credits

You must be the importer of the goods to claim GST credits. You are the importer of the goods if both of the following apply:

·         you have caused the goods to be brought to Australia for your own purposes

·         you, or your agent, are named as the 'owner' of the goods on the import declaration.

You have caused goods to be brought to Australia if the goods were brought to Australia for application to your own purposes after importation.

You use goods for your own purposes if you sell, lease or hire the goods, use the goods as trading stock or use the goods in the manner consistent with their design or nature.

Example: Installer named as owner on import declaration

An Australian manufacturer purchases equipment from a non-resident supplier. The non-resident supplier engages an Australian specialist installer to install the equipment in Australia.

The specialist installer is named as 'owner' on the import declaration and pays the GST on the taxable importation.

The specialist installer did not cause the equipment to be brought to Australia for application to its own purposes after importation: they did not sell, lease or hire the equipment, nor use it in a manner consistent with its design or nature. Therefore the installer is not the importer and is not entitled to a GST credit.

If, however, the specialist installer enters their name as 'owner' on the import declaration, as agent of the non-resident supplier, then the non-resident supplier will be the importer because the following two events have occurred:

·         the non-resident supplier has caused the goods to be brought to Australia to sell to an Australian manufacturer

·         their agent was named as the 'owner' of the goods on the import declaration.

The Australian resident agent of the non-resident supplier would be entitled to the GST credit on the taxable importation if the non-resident supplier is registered, or required to be registered for GST and imported the goods for a creditable purpose.

Where no agency arrangement exists

In circumstances where a third party is named as 'owner' on the import declaration but is not your agent, the third party will be liable to pay the GST on the taxable importation and will not be entitled to claim a GST credit because they are not the importer.

If you reimburse the GST for which a third party was liable to pay on the taxable importation, you will not be able to claim a GST credit because you are not named as 'owner' of the goods on the import declaration.

In these situations, no-one will be entitled to a GST credit.

Further paragraphs 48 to 50 in GSTR 2003/15 Goods and Services tax Ruling: Importation of goods into Australia discuss when an entity has imported goods into Australia

48. For a taxable importation under Division 13, the entity that enters goods for home consumption is not necessarily the entity that imports them. The act of entering goods through Customs does not in itself equate to importing goods.

49. The entity that imports goods within the meaning of Division 15, in the context of a taxable importation under Division 13, is the entity that:

a)    causes the goods to be brought to Australia for application to its own purposes after importation, whether by way of supply, use, or otherwise; and

b)    completes the customs formalities for the entry of the goods for home consumption.

50. 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 purposes after importation is the entity that causes the goods to be brought to Australia.

From the facts given:

• the Applicant is the supplier of the goods sold to the purchaser; and
• when the goods sold to the purchaser were imported into Australia, Company A and Company B were by mistake recorded as the owners of the imported goods in the import declaration and they used their GST deferral account to pay the GST liable on these taxable importations

In this instance we do not consider that Company A and B were the importer of the goods sold to the purchaser because they did not cause the goods to be brought to Australia to sell to the purchaser despite the fact that their names appear as 'owner' in the import declaration.

Sales of goods

GST is payable on a taxable supply. Where a supply is a taxable supply the GST registered supplier generally is the one liable to collect, report and remit the collected GST to the Australian Taxation Office (ATO).

However under subsection 57-5(1) of the GST Act where a non-resident made a taxable supply through a resident agent, it is the resident agent and not the non-resident that is responsible to report and remit the collected GST to the ATO.

From the information received, the Applicant did not make the sale of the imported goods to the purchaser through Company A and Company B. Accordingly Company A and Company B cannot charge GST on the supply made by the Applicant to the purchaser.

Question 2

Under section 23-5 of the GST Act, an entity is required to be registered for GST where the entity is carrying on an enterprise and their GST turnover meets the registration turnover threshold which currently is A$75,000 (A$150,000 for non-profit organisation).

The Applicant's GST turnover will meet the registration turnover threshold if its current GST turnover or projected GST turnover for sales that are connected with Australia is at or above the GST turnover threshold of $A75,000.

We will now determine whether the sales of the imported goods made by the Applicant to the purchaser are connected with Australia before considering whether the GST annual turnover meets the GST registration threshold.

Connected with Australia

A sale of goods is connected with Australia if one of the following applies:

• The goods are delivered or made available in Australia to the recipient of the supply (subsection 9-25(1) of the GST Act);
• The sale of goods involves the goods being removed from Australia (subsection 9-25(2) of the GST Act);
• The sale of goods involves the goods being brought to Australia and the supplier imports the goods into Australia (subsection 9-25(3) of the GST Act);
• The sales of goods is an offshore sales of low value goods imported into Australia by the consumers (purchasers not registered for GST or registered and the purchase is for the business carried on in Australia)(subsection 9-25(3A) of the GST Act)

From the information given, the Applicant did not import the goods sold to the purchaser into Australia. However, the goods sold were made available to the purchaser and delivered to the purchaser in Australia after Companies A and B have imported the goods into Australia.

In this instance the sale of goods made by the Applicant to the purchaser is connected with Australia under subsection 9-25(1) of the GST Act.

The next step is to consider whether the GST annual turnover has reached the GST registration threshold of A$75,000.

GST turnover

Section 188-10 of the GST Act is relevant for working out whether the GST turnover meets the GST registration turnover threshold.

Under subsection 188-10(1) of the GST Act you have a GST turnover that meets the GST registration turnover threshold if:

a)    Your current GST turnover is at or above the turnover threshold and the Commissioner is not satisfied that your projected GST turnover is below the GST registration turnover threshold ; or

b)    Your projected GST turnover is at or above the GST registration turnover threshold.

Under subsection 188-10(2) of the GST Act you have a turnover that does not exceed the GST registration turnover threshold if:

a)    Your current GST turnover is at or below the GST registration turnover threshold and the Commissioner is not satisfied that your projected GST turnover is above the GST registration turnover threshold; or

b)    Your projected GST turnover is at or below the GST registration turnover threshold.

Under subsection 188-15(1) of the GST Act your current GST turnover at a time during a particular month is the sum of the values of all the supplies that you have made or are likely to make during the 12 months at the end of that month.

Under subsection 188-20(1) of the GST Act your projected GST turnover at a time during a particular months is the sum of the values of all the supplies you have made or are like to make during that month and the next 11 Months.

GSTR 2001/7 -Goods and Services Tax Ruling: meaning of GST turnover including the effect of section 188-25 on projected GST turnover provides guidance ion current and projected GST turnover for GST registration purposes.

Regarding whether your GST turnover meets or does not exceed a turnover threshold, paragraphs 16 to 19 in GSTR 2001/7 state the following:

Whether your GST turnover meets, or does not exceed, a turnover threshold

16. Whether you have a GST turnover that meets or does not exceed a particular turnover threshold depends on an objective assessment of your projected GST turnover and current GST turnover. An 'objective assessment' is one that a reasonable person could be expected to arrive at having regard to the facts and circumstances which apply to your enterprise at the relevant time. The Commissioner will accept your assessment of these turnovers unless he has reason to believe that your assessment was not reasonable.

17. Under subsection 188-10(1), you meet a particular turnover threshold if your projected GST turnover is at or above the threshold. You also meet a turnover threshold if your current GST turnover is at or above the turnover threshold and it is not possible to conclude that your projected GST turnover is below the threshold. This will occur if your projected GST turnover is also above the relevant threshold, or if your circumstances are such that it is not possible to calculate a projected GST turnover. In either of these situations, the Commissioner cannot be satisfied that your projected GST turnover is below the turnover threshold.

18. Similarly, under subsection 188-10(2), you have a GST turnover that does not exceed a particular turnover threshold if your projected GST turnover is at or below that threshold. You also do not exceed a turnover threshold if your current GST turnover is at or below the turnover threshold and it is not possible to conclude that your projected GST turnover is above the threshold. This will occur if your projected GST turnover is at or below the relevant threshold or your circumstances are such that it is not possible to calculate a projected GST turnover. In either of these situations, the Commissioner cannot be satisfied that your projected GST turnover is above the turnover threshold.

19. Although your current GST turnover and your projected GST turnover may be capable of being determined on every day during a month, there is no requirement for continuous recalculation. However, under the GST Act there are obligations if you meet or exceed a particular threshold and there is an opportunity for you to make certain elections if you do not exceed a particular threshold. Therefore, you should be aware of the relevant thresholds likely to affect you and consider whether your turnover may be sufficiently close to the relevant thresholds to make a review prudent. For example, Entity A conducts an enterprise with a GST turnover of $70,000 and is not registered for GST. Because Entity A is aware that a $5,000 increase in its GST turnover will result in the $75,000 registration turnover threshold being met, it should monitor changes in its turnover. Entity B by contrast, is registered for GST, conducts an enterprise with a GST turnover of $600,000 and accounts on a cash basis. The nearest relevant threshold is the cash accounting turnover threshold ($2,000,000). Entity B may decide to review its current GST turnover and projected GST turnover on an annual basis whilst being aware that a significant change in turnover may require a further review.

The phrase 'likely to make' appears in sections 188-15 and 188-20 of the GST Act. This phrase refers to a similar level of expectancy although the GST Act has no definition for this phrase. The words retain their ordinary meaning in the context of the legislation. Regarding the meaning 'likely to make' or 'likely to be made' paragraphs 23 and 24 in GSTR 2001/7 state:

23. For the purposes of sections 188-15, 188-20 and 188-25, the expressions, 'likely to make', and 'likely to be made', mean that on the balance of probabilities, it can be predicated that the supply is more likely than not to be made.

24. When a supply is made, is determined in each case by reference to the terms of the particular contract, if applicable, and the nature of the supply. For the purpose of calculating supplies likely to be made, we will accept a calculation based on a bona fide business plan, accounting budget or some other reasonable estimate.

From the information given, at the time the Applicant received the three revised purchase orders in July 20XX and issued the tax invoices in December 20XX, it was aware that the total turnover of these three orders was above the GST registration threshold of A$75,000.

Further based on the information received it is not possible to conclude that the Applicant's projected turnover was below the threshold since by the time the Applicant received the orders, issued commercial invoices and tax invoices it was aware that its projected turnover would be above A$75,000.

In this instance the Applicant's GST turnover satisfied paragraph (a) in subsection 188-10(1) of the GST Act when selling the goods under DDP incoterms to the purchaser.

The Applicant was therefore required to be registered for GST when selling the goods to the purchaser.

One of the requirements for a taxable supply is that the supply is made for consideration. Since the Applicant issued tax invoices upon receipt of payments for the sales the GST registration date would be December 20XX, which is the date the first payment was received.

The Applicant has advised it was a mistake made by the freight company when the ABN of Company A and Company B was used in the import declaration. The Department of Home Affairs (DHA) administers the importation of goods into Australia. The Applicant has advised that it has sold the goods under the DPP Inco terms and a refund will be made to Companies A and B for the GST they have paid for the taxable importation In this instance the Applicant can contact DHA regarding amendments to the import declaration so that the Applicant can be listed as owner of the imported goods.

In this instance the Applicant can choose to backdate the GST registration to 1 October 20XX (the month when the first importation of the goods were imported into Australia) provided the Applicant would satisfy the requirements in section 15-5 of the GST Act .

Question 3

Under section 15-15 of the GST Act you ae entitled to an input tax credit for any creditable importation that you make.

Under section 15-5 of the GST Act you make a creditable importation if:

a)    you import the goods solely or partly for a creditable purpose; and

b)    the importation is a taxable importation; and

c)    you are registered or required to be registered for GST.

Under section 13-5 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).

For input tax credit entitlement purposes, the entity that causes the goods to be brought to Australia must ensure that it enters the goods for home consumption by appearing as 'owner' on the import declaration, or appointing an agent to do so on its behalf.

From the facts given the Applicant did not make a taxable importation of the goods it sold to the purchaser as it was not listed as the owner of the goods in the import declaration and liable to pay GST on the taxable importation at the time the goods were released by the Department of Home Affairs.

Further the Applicant did not have any document that clearly demonstrates that there was an agency arrangement in place when Companies A and B (wherever applicable) are named as owner on the import declaration for us to accept that the Applicant be considered as the importer of the goods it sold to the purchaser.

In this instance paragraph (b) in section 15-5 of the GST Act is not satisfied. The Applicant cannot claim the GST paid on the taxable importation made by Companies A and B under section 15-5 of the GST Act.

Question 4

Our decision for answer 3 is the Applicant cannot claim the GST paid on the taxable importations as it has not made a creditable importation under section 15-5 of the GST Act.

The Applicant has advised it was a mistake made by the freight company when the ABN of Company A and Company B was used in the import declaration. There is no provision under the GST Act that allows the Commissioner to exercise his discretion when a mistake has been made on an import declaration to allow a claim of GST paid on a taxable importation.

The Department of Home Affairs (DHA) administers the importation of goods into Australia. The applicant has advised that it has sold the goods under the DPP Inco terms and a refund will be made to Companies A and B for the GST they have paid for the taxable importation In this instance the Applicant can contact DHA regarding amendments to the import declarations.

Where amendments have been made to the import declaration and the Applicant can provide proof it has made the payments for the taxable importations it will be able to claim the GST paid on the taxable importations where it is registered for GST.