Edited version of private advice

Authorisation Number: 1052000915606

Date of advice: 4 July 2022

Ruling

Subject: GST and importations

Question

Are you required to pay GST on the sale of goods to the purchaser that you purchase from overseas manufacturers and are imported to Australia by the purchaser?

Answer

No, you are not required to pay GST on the sale of goods to the purchaser that you purchase from overseas manufacturers and are imported to Australia by the purchaser.

Relevant facts and circumstances

You have entered into an agreement (Agreement) with an entity under which you are considered as the supplier of goods and the entity is the purchaser of the goods.

Certain goods that you supply to the purchaser are purchased by you from manufacturers who are based overseas.

Under the Agreement:

•         you are the entity that enters into a contract with the overseas manufacturers to purchase the goods,

•         the overseas manufacturer invoices you for the payment of the goods and you are the entity that is liable to pay for the goods the manufacturers supply,

•         the purchaser requires you to engage a freight forwarder of their choice to transport the goods into Australia,

•         you are required to forward the release of the House of Bill of lading documents to the freight forwarder,

•         the manufacturer addresses the goods to be delivered to the purchaser and as such under the International transport documents (eg: Bill of lading) the purchaser is referred to as the 'consignee' of the goods,

•         the manufacturer issues an invoice to the purchaser also. However, this is not an invoice that demands payment from the purchaser. It is merely an invoice that replicates the invoice issued by the manufacturer to you that outlines the details of goods shipped,

•         you are required to send the relevant Customs and other documents in relation to the importation to a customs clearance agent appointed by the purchaser.

The title to the goods passes to the purchaser overseas.

When you price the goods that you supply to the purchaser, you take into account the services you have performed (such as procurement services performed in Australia, costs for labelling etc). These services are incidental to the supply of the goods and do not have an aim in themselves to be considered as separate supplies.

The purchaser is considered as the 'importer' and 'owner' of goods for Australian Customs purposes.

The purchaser uses the invoice you issue (which comprises the price of the goods you have charged the purchaser), for the purposes of clearing the goods at Customs.

The purchaser pays GST on the importation of the goods into Australia.

Relevant legislative provisions

Reasons for decision

GST is payable on taxable supplies. A Taxable supply is defined in section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as follows:

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.

(terms marked with asterisks (*) are defined in section 195-1 of the GST Act.

Where any of the requirements of a taxable supply is not satisfied, you do not make a taxable supply and as such no GST is payable on the sale of the goods.

Of relevance to this case is deciding whether the supply of the goods you make to the purchaser meets paragraph 9-5(c) of the GST Act, which is, the supply is connected with the indirect tax zone.

Section 9-25 of the GST Act provides the meaning of 'connected with the indirect tax zone. Subsection 9-25(3) states:

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.

The Commissioner's views in relation to arrangements of the type that you have entered into with the purchaser is outlined in goods and services tax ruling GSTR 2003/15 Goods and services tax: importation of goods into Australia.

Section 9-25

221.  One of the requirements for a supply to be a taxable supply is that the supply is connected with Australia.

222.  For supplies of goods to Australia:

•                     subsection 9-25(3) provides that a supply is connected with Australia if the supplier imports the goods into Australia; or

•                     from 1 July 2018, subsection 9-25(3A) provides that an offshore supply of low value goods is connected with Australia if it is connected with Australia under Subdivision 84-C.

223.  Both a supplier and an acquirer of goods may cause the goods to be brought into Australia. The word 'import' must, therefore, in the context of subsection 9-25(3), also encompass completing the customs formalities. In that way it can be established which entity imports the goods into Australia, that is, the entity that not only causes the goods to be brought to Australia but also attends to the customs formalities.

224.  The supplier, therefore, imports goods into Australia for the purposes of subsection 9-25(3) if it causes the goods to be brought to Australia and it also completes the customs formalities. This is the case where a supplier enters the goods for home consumption78 or for warehousing. However, a supplier does not import goods where the customs formalities for the importation of the goods are completed by the recipient of the supply.

225.  Where a supplier imports goods, there may be both a taxable supply and a taxable importation as a result of a single commercial transaction.

Please refer to example 6 in GSTR 2003/15 for the Commissioner's views on transactions where multiple parties are involved.

Under the Agreement, it is the purchaser that imports the goods into Australia and not you (the supplier). Accordingly, in accordance with the Commissioners' views presented in GSTR 2003/15, the supply of the goods you make to the purchaser does not meet paragraph 9-5(c) of the GST Act and as such is not a taxable supply.

GST is not payable on the supply of the goods you make to the purchaser under the Agreement.