Private ruling: Deferred GST Scheme and applying for refunds of duty overpaid
Published: October 2013

Ruling: Q1: Is a refund application form containing an amendment which effects a previously declared customs value lodged with the Australian Customs and Border Protection Service (ACBPS), by an Australian entity (Aus Ltd), considered to be an entry of goods for home consumption within the meaning of the Customs Act 1901 (the Customs Act) and consequently in accordance with regulation 33-15.06(1)(a) of the A New Tax System (GST) Regulations 1999 , (the GST Regulations)? | A1: No. Aus Ltd has sought to lodge a refund application seeking a refund of duty overpaid, for goods that have previously been entered for home consumption. The refund application containing the amendment to the original import declaration, self-assessed clearance declaration, or a periodic return is not considered to be an entry of goods for home consumption within the meaning of the Customs Act and the GST Regulations. | Q2: Will Aus Ltd's registration under the Deferred GST Scheme be revoked by the Australian Taxation Office (ATO), if Aus Ltd applies to retrospectively adjust previously declared customs values, (due to transfer pricing adjustments), by lodging an error notice and refund application forms with ACBPS manually instead of electronically? | A2: No. Aus Ltd's registration under the Deferred GST Scheme will not be revoked by the ATO. As determined in the answer to Question 1, applications lodged with ACBPS, requesting a refund of duty overpaid are not an entry for home consumption. Thus an application for a refund will have no material affect on the deferred GST status of an entity; regardless of whether they lodge their refund application by computer or manually.

Relevant facts and circumstances: Aus Ltd is an Australian entity that imports into Australia a broad range of goods and is registered for the Deferred GST Scheme. Aus Ltd imports goods in many different circumstances and the goods may or may not be entered for home consumption prior to their arrival at a port or airport in Australia. Aus Ltd advise that they have communicated with ACBPS in the appropriate manner in accordance with sections 68 and 71A of the Customs Act and have submitted their import declarations electronically via the ACBPS Integrated Cargo System (ICS). All taxable importations were fully creditable for Aus Ltd thus input tax credits were claimed each month in their BAS against the deferred GST amount shown at 7A on the business activity statement. After lodging their import declarations, Aus Ltd processed transfer pricing adjustments which reduced the cost to it of relevant goods imported into Australia therefore also reducing the customs value of the goods. Aus Ltd lodged an error notice with ACBPS, to advise it would need to retrospectively adjust previously declared customs values; and therefore it was entitled to a refund of duty overpaid. A change in the customs value also changes the amount of GST payable on the taxable importation. Aus Ltd then lodged refund application forms with ACBPS for each affected import declaration. Aus Ltd did not amend the import declaration electronically through the ICS. Aus Ltd had been advised by their customs broker that the cost of processing a change to each of the import declarations electronically would exceed the amount of their refund entitlement. Aus Ltd advise that any decreases to monthly GST liability on the taxable importations would be fully offset by the corresponding reduction in its entitlement to input tax credits already claimed, thus the changes would have a nil impact on the net amount of GST reported by Aus Ltd each month. Taxpayers Contentions ACBPS advised Aus Ltd that is was unable to process the refund applications lodged, as it was a condition of the deferred GST scheme that taxpayers deal with ACBPS electronically. ACBPS also advised Aus Ltd that their status as a deferred GST client may be revoked as a result of failing to meet the requirements of 33-15.06 of the GST Regulations. Aus Ltd contends that there is no basis for the Commissioner to revoke their approval should they pursue manual refund applications as all goods were entered for home consumption in accordance with regulation 33-15.06(1). Aus Ltd note that this regulation does not address processing of refund applications or impose any requirement on approved entities to lodge refund applications by computer. They add the process for lodgement of refund applications is set out in Regulation 128 of the Customs Regulations. This regulation allows for a refund application to be lodged by computer or manually and does not restrict entities that have lodged the original goods for home consumptions by computer, to also make refund applications by computer.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Regulations 1999 Subregulation 33-15.06(1), | A New Tax System (Goods and Services Tax) Regulations 1999 Regulation 33-15.08, | Customs Act 1901 Section 68, | Customs Act 1901 Section 71A, | Customs Act 1901 Section 71F, | Customs Act 1901 Section 71G, | Customs Act 1901 Section 71K, | Customs Act 1901 Section 71L, | Customs Act 1901 Section 163 and | Customs Regulations 1926 Regulation 128.

Reasons for decision: Summary: An entity approved for deferred GST status is required to comply with the requirements outlined in Regulation 33-15.06 of the GST Regulations as follows:- | Detailed Reasoning - (1): An approved entity must: (a) enter goods for home consumption by computer (within the meaning of the Customs Act 1901 ); and (b) lodge its GST returns electronically in a format approved by the Commissioner for this regulation; and (c) pay the amounts of GST for which the entity is liable by electronic payment. The meaning of entering goods for home consumption is defined in the Customs Act. Entry of goods for home consumption The Customs Act requires imported goods to be entered for home consumption or warehousing. The 'owner' of the goods must provide ACBPS with specific information in a specified format (the 'import or warehouse declaration'). If goods are entered for home consumption, the 'owner' must pay any customs duty to ACBPS at the time of entry of the goods. Section 68 of the Customs Act relates to goods that are imported by an entity such as Aus Ltd. imports goods in different circumstances and the goods may or may not be entered for home consumption prior to arrival at a port or airport in Australia. Thus subsection 68(2) or (3) may apply to Aus Ltd importations as follows:- Subsection 68(2) of the Customs Act states: The owner of goods to which this section applies may enter the goods for home consumption or for warehousing: (a) for goods carried on board a ship or aircraft - at any time before the ship or aircraft first arrives at a port or airport in Australia at which any goods are to be discharged; or (b) for goods that are a ship or aircraft and that are not carried on board a ship or aircraft - at any time before the ship or aircraft first arrives at a port or airport in Australia. Subsection 68(3) of the Customs Act states: If the owner of goods to which this section applies does not enter the goods under subsection (2) for home consumption or for warehousing, the owner must enter the goods for home consumption or for warehousing: (a) for goods carried on board a ship or aircraft - after the ship or aircraft first arrives at a port or airport in Australia at which any goods are to be discharged; or (b) for goods that are a ship or aircraft and that are not carried on board a ship or aircraft - after the ship or aircraft first arrives at a port or airport in Australia. Subsection 68(3A) of the Customs Act states: An entry of goods for home consumption is made by communicating to Customs an import declaration in respect of the goods. Subsection 71A(1) of the Customs Act states: An import declaration is a communication to Customs in accordance with this section of information about: (a) goods to which section 68 applies; or (b) warehoused goods; that are intended to be entered for home consumption. Subsection 71A(2) of the Customs Act states: An import declaration can be communicated by document or electronically. Documentary import declaration is covered by subsection 71A(3) of the Customs Act and electronic import declaration is covered by subsections 71A(7) and 71A(8) of the Customs Act. Sections 71K and 71L of the Customs Act describe the manner and effect of communicating with ACBPS by document and electronically respectively. Aus Ltd advise that they have communicated with ACBPS in the appropriate manner in accordance with sections 68 and 71A of the Customs Act and their communication to ACBPS was via import declarations submitted electronically via the ICS. Withdrawn entry Subsection 71F(2) of the Customs Act [Alteration of entry] states: If, at any time after a person has communicated an import entry to Customs and before the goods are dealt with in accordance with the entry, the person changes information included in the entry, the person is taken, at the time when the import entry advice is given or communicated in respect of the altered entry, to have withdrawn the entry as it previously stood. Subsection 71F(2) provides that alteration of an entry done after an import declaration (entry) is made to ACBPS and before the goods are dealt with in accordance with the entry would constitute a withdrawal. As such any new entry would be regarded as a new entry for home consumption and would be required to be lodged electronically if the importer was registered under the Deferred GST Scheme. This provision is not relevant in the current set of circumstances as Aus Ltd goods have already been dealt with in accordance with the original entry. Subsection 71G(1) states: If goods have been entered for home consumption under subsection 68(2) or (3), a person must not communicate a further import declaration or a warehouse declaration in respect of the goods or any part of the goods unless the import declaration that resulted in the goods being entered for home consumption is withdrawn. Section 71J states: Any annotation of an import entry that is made by Customs as a result of the acceptance by Customs of an application for a refund or rebate of all or a part of the duty paid, or for a remission of all or part of the duty payable, on goods covered by the entry, is not to be taken to constitute a withdrawal of the entry for the purposes of this Act. We note that subsection 71G(1) shows that unless the original import declaration is withdrawn, a new declaration cannot be made. We also note that under section 71J of the Customs Act that acceptance by ACBPS of an application for a refund of duty paid is not taken to constitute a withdrawal of the entry for the purposes of the Customs Act. ACBPS have received refund applications seeking a refund of duty. If ACBPS accept these refund requests then the alteration to the original import declaration cannot be taken as to constitute a withdrawal of the entry. As such the refund request is not an entry for home consumption and therefore does not need to be lodged electronically by Aus Ltd. Refunds of Customs Duty Section 163 of the Customs Act allows for refunds of customs duty to be made as follows:- 163 Refunds etc. of duty (1) Refunds, rebates and remissions of duty may be made: (a) in respect of goods generally or in respect of the goods included in a class of goods; and (b) in such circumstances, and subject to such conditions and restrictions (if any), as are prescribed, being circumstances, and conditions and restrictions, that relate to goods generally or to the goods included in the class of goods. (1A) The regulations may prescribe the amount, or the means of determining the amount, of any refund, rebate or remission of duty that may be made for the purposes of subsection (1AA) Subject to subsection (1AD), the regulations may prescribe: (a) the manner of making application, either by document or by computer, for such refunds, rebates or remissions; and (b) the procedure to be followed by Customs in dealing with such applications, including procedures for requesting further information in relation to issues raised in such applications. (1AB) Regulations made for the purposes of subsection (1AA) that provide for the making of an application for a refund, rebate or remission of duty by computer must indicate when that application is to be taken, for the purposes of this Act, to have been communicated to Customs. (1AC) Regulations made for the purposes of subsection (1AA) that provide for the making of applications for refund, rebate or remission of duty by computer may include contingency arrangements to deal with circumstances where the computer system employed in relation to such applications is down. Regulation 128 of the Customs Regulations 1926 (the Customs Regulations) outline the requirements for an application of a refund of duty paid as follows:- 128 Application for refund, rebate or remission of duty (1) For paragraph 163(1AA)(a) of the Act, an application by document for a refund, a rebate or a remission of duty must: (a) be in an approved form; and (b) include information as required by the form; and (c) be signed as required by the form; and (e) state which circumstance under subregulation 126(1), 126B(1), 126C(1), 126D(1), 126DA(1) or 126F(1) applies to each of the imported goods; and (f) either: (i) be given or sent to an officer doing duty in relation to refunds; or (ii) be left in a Customs Office at a place designated for lodgment of applications for refunds, rebates or remissions of duty. (1A) For paragraph 163(1AA)(a) of the Act, an application by computer for a refund, a rebate or a remission of duty must: (a) include information as required by an approved statement; and (b) state which circumstance under subregulation 126(1), 126B(1), 126C(1), 126D(1), 126DA(1) or 126F(1) applies to each of the imported goods; and (c) be transmitted, and signed, in a manner that meets the information technology requirements determined under section 126DA of the Act that apply to import declarations, or self-assessed clearance declarations, about goods of the kind to which the application relates. Aus Ltd has lodged a refund request as per section 163 of the Customs Act. It is a requirement of importers who are registered under the Deferral GST Scheme to enter goods for home consumption electronically (Regulation 33-15.06(1)(a). In our situation, Aus Ltd has made only one entry of goods for home consumption, and the goods were dealt with in accordance with that entry. The original import declaration was lodged electronically by Aus Ltd. Any changes made (adjusting the price as per the transfer-pricing revaluation) and communicated to ACBPS under the refund provisions outlined above, will not constitute a withdrawal of the original entry if ACBPS accepts that refund request. If Aus Ltd lodges the refund request in accordance with the above regulations there appears to be no reason for ACBPS not to accept the refund request despite the request being lodged manually as opposed to electronically. We conclude that the application for a refund does not constitute an entry of goods for home consumption as such there is no requirement for Aus Ltd to submit the request electronically to satisfy GST regulation 33-15.06(1)(a). | Detailed Reasoning - Detailed reasoning: The Deferred GST Scheme (DGST scheme) allows importers of goods to defer the payment of GST on their imports. In order to be approved for the DGST Scheme taxpayers are required to fulfil strict eligibility requirements and these requirements continue to apply during the entire time that the taxpayer remains on the scheme. Deferred GST is referred to at paragraph 33-15(1)(b) of the GST Act as follows:- 33-15 Payments of assessed GST on importations (1) Amounts of assessed GST on taxable importations are to be paid by the importer to the Commonwealth: (a) at the same time, at the same place, and in the same manner, as customs duty is payable on the goods in question (or would be payable if the goods were subject to customs duty); or (b) in the circumstances specified in the regulations, within such further time specified in the regulations, and at the place and in the manner specified in the regulations. Note: The regulations could (for example) allow for deferral of payments to coincide with payments of assessed net amounts. Paragraph 33-15(b) of the GST Act then refers us to the GST regulations for further explanation of the DGST scheme. Requirements for approval Subregulation 33-15.03 of the GST Regulations lists the requirements for approval to make deferred payments of GST on taxable importations. Aus Ltd satisfies these requirements and is presently approved for the DGST scheme. As an approved entity Aus Ltd is required to comply with the requirements outlined in Regulation 33-15.06 of the GST Regulations, as explained in the reasons for decisions in Question 1. Aus Ltd advise that all goods are imported within the meaning of the Customs Act and as required under Regulation 33-15.06(1) of the GST Regulations, the import declarations were lodged electronically via the Customs Integrated Cargo System (ICS). Revocation of approval Regulation 33-15.08 of the GST Regulations sets out the manner in which an entity that is approved to defer GST on taxable imports must deal with the ATO and states: | Detailed Reasoning - (1): The Commissioner may, in writing, revoke an entity's approval if the Commissioner is satisfied that: (a) the entity no longer meets the requirements for approval in regulation 33-15.03; or (b) the bank guarantee (if any) provided by the entity under regulation 33-15.04 has lapsed; or (c) the entity has failed to meet a requirement in subregulation 33-15.06(1); or (d) the entity is liable to pay a charge or penalty mentioned in Part IIA of the Taxation Administration Act 1953 ; or (e) the entity is being prosecuted for, or has been convicted of, an offence under Part III of the Taxation Administration Act 1953 . We are specifically considering subregulation 33-15.08(1)(c) of the GST Regulations and whether or not Aus Ltd has failed to meet any requirement in subregulation 33-15.06(1) of the GST Regulations. As advised in the answer to Question 1, an application for a refund of customs duty paid is not considered to be a further entry of goods for home consumption within the meaning of the Customs Act. We also note that regulation 128 of the Customs Regulations allows the refund application to be lodged either by document or electronically. As the application for a refund is not an entry for home consumption, there is no requirement under subregulation 33-15.06(1) of the GST Regulations, requiring Aus Ltd to make this application by computer. Accordingly, Aus Ltd is not in breach of paragraph 33-15.08(1)(c) as they have not failed to meet a requirement in subregulation 33-15.06(1) of the GST Regulations. We find that the Commissioner would not consider revoking the Aus Ltd approval for Aus Ltd as they are not in breach of any of the items listed at subregulation 33-15.08(1) of the GST Regulations. | Detailed Reasoning - Other Information: GSTR 2003/15 GSTR 2003/15 covers deferred GST at paragraphs 283 to 288 inclusive. These provisions require the importer to deal electronically with ACBPS in relation to entering goods for home consumption. GSTR 2003/15 only specifies entering goods for home consumption; this ruling does not mention returns or refunds of duty or GST. We find there is no such authority in GSTR 2003/15 or in the GST Act or GST Regulations requiring an entity approved under the DGST scheme to submit their applications for refunds by computer. All publications mentioned in this ruling are available on our website at www.ato.gov.au