Edited version of private advice

Authorisation Number: 1052021484813

Date of advice: 23 August 2022

Ruling

Subject: GST and importation

Question

What are the GST implications for Entity A, when it subsequently receives a payment from Entity B under a transfer pricing adjustment that effects a decrease in the price of the goods previously purchased and imported into Australia from overseas as taxable importations?

Answer

Entity A may need to revise its business activity statements (BAS) for the relevant periods to reflect the correct amount of input tax credits that it is entitled to claim on its creditable importations.

The revised amount of input tax credit that Entity A is entitled to, will depend on the amount of GST on the taxable importations as a result of changes to the customs value and duty, as calculated and assessed by the Department of Home Affairs.

This ruling applies for the following specified period.

The scheme commences on the specified date.

Relevant facts and circumstances

Entity A is established in Australia and is in Australia.

Entity B is overseas and is a subsidiary of Entity A.

Entity A has an ABN and is registered for the goods and services tax (GST).

Entity A sells goods produced overseas to customers in Australia.

Entity A purchases goods from Entity B. The goods are imported from overseas to Australia. Entity A on sells those imported goods to unrelated customers in Australia.

The importations were taxable importations. Entity A is not registered under the deferred GST scheme and the GST on taxable importations was paid at Customs upon importation.

Entity A has claimed all the input tax credits for the GST paid at Customs for the relevant taxable importation of the goods when it lodged its business activity statements (BAS) for the relevant tax periods.

Entity A and Entity B have agreed to a price adjustment for the sale and purchase of goods between the entities, based on requirements prescribed under the Memorandum of price adjustment (the Memorandum).

Entity A received a credit note for $ credited on dd/mm/yy by Entity B.

The credit of $ as per the credit note of dd/mm/yy issued by Entity B to Entity A, represents an adjustment that results in a reduction in the purchase price of the imported goods purchased by Entity A from Entity B.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999section 7-1

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

A New Tax System (Goods and Services Tax) Act 1999section 15-20

Reasons for decision

Under section 7-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), GST is payable on taxable supplies and taxable importations.

Entitlements to input tax credits arise on creditable acquisitions and creditable importations.

The Department of Home Affairs collects the GST on taxable importations.

Under section 13-20 of the GST Act, the GST payable is 10% of the value of the taxable importation. The assessed GST on a taxable importation is payable at the same time, at the same place, and in the same manner as you would pay customs duty (or would be payable if the goods are subject to customs duty).

Under section 15-20 of the GST Act, the amount of input tax credit for a creditable importation is an amount equal to the GST assessed as payable on the taxable importation. That is, you can only claim an amount of input tax credit which is the same as the amount of the GST paid to the Comptroller-General of Customs on importation.

Therefore, if the amount of assessed GST on your taxable importation of goods is subsequently changed by the Department of Home Affairs, you will need to correct your business activity statement (BAS) to reflect the correct amount of input tax credits that you are entitled to claim for your corresponding creditable importation.

Subsection 13-20(2) of the GST Act provides that the value of a taxable importation is the sum of the customs value of the goods imported and amongst other things, any customs duty payable in respect of the importation of the goods.

A change to the customs value relating to the transfer pricing adjustment would lead to subsequent adjustment to the GST payable to the Comptroller-General of Customs.

You will need to contact Australian Border Force (which is part of the Department of Home Affairs) for rectification, so that the correct amount of any duty and GST payable is calculated based on the adjustment to the customs value of the imported goods relating to the transfer pricing adjustment. You are only entitled to claim an amount of input tax credits equal to the GST amount paid to Customs on the taxable importation.

You may need to seek a transfer pricing valuation advice and amend your import declarations to adjust previously declared customs values due to transfer pricing revaluation adjustments for each affected import declaration.

More information is available by visiting the links on the Australian Border Force (ABF) website at:

https://www.abf.gov.au/importing-exporting-and-manufacturing/importing/refund-of-customs-duty

https://www.abf.gov.au/help-and-support/voluntary-disclosures