Private ruling: Goods and services tax (GST) and importation and sale of goods
Date of advice: 7 November 2017
Published: April 2018

Ruling: Q1: Should you have registered for GST? | A1: You are not required to be registered for GST, but you are entitled to be registered for GST. You may cancel your GST registration. Whether you cancel your GST registration is a business decision for you to make. | Q2: What are your GST obligations? | A2: You are liable to pay GST to the Department of Immigration and Border Protection (DIBP) on importations of goods into Australia. These GST liabilities are payable at the time of customs clearance. You must issue tax invoices to customers if they request a tax invoice. You are liable to remit GST to the Australian Taxation Office (ATO) on sales of goods you make to Australian customers. You must lodge GST returns with the ATO and report GST on sales in your GST returns. If you cancel your GST registration, you will cease to have GST obligations, apart from paying GST on importations. | Q3: What are your GST entitlements? | A3: You can claim input tax credits for the GST paid on importations of goods into Australia. You can also claim input tax credits on acquisitions you make from Australian suppliers where the supplies made to you are subject to GST. However, if you cancel your GST registration, you will no longer be entitled to claim input tax credits. | Q4: Will your tax compliance be easier if you cancel your GST registration? | A4: Yes. If you cancel your GST registration, you will not be required to ● collect GST on sales; or ● issue tax invoices; or ● lodge GST returns; or ● remit GST to the ATO on sales, relating to the cancellation date of effect onwards. However, you will still be required to pay GST on importations if you cancel your GST registration. You will not be able to recover this GST as an input tax credit if your cancel your GST registration.

Relevant facts and circumstances: You are registered for GST. You are registered to report GST quarterly. You are an overseas company. Your establishment is in that overseas country. You do not have an establishment or employees in Australia. You sell goods to Australian customers. Your Australian customers order from your overseas based website. Your Australian customers pay you in the currency of that overseas country directly into your overseas business bank account. You import goods into Australia with a consignment always having a value exceeding $1,000. You then store it in a logistics warehouse owned by another entity. After an Australian customer places an order for goods, you meet the order from stock in the Australian warehouse. You don’t send goods to the Australian warehouse to fulfil a pre-order. The only product that is delivered throughout Australia from the third party logistics warehouse is a particular product.

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 11-5 | A New Tax System (Goods and Services Tax) Act 1999 section 11-15 | A New Tax System (Goods and Services Tax) Act 1999 section 13-5 | A New Tax System (Goods and Services Tax) Act 1999 section 13-10 | A New Tax System (Goods and Services Tax) Act 1999 section 15-5 | A New Tax System (Goods and Services Tax) Act 1999 section 15-10 | A New Tax System (Goods and Services Tax) Act 1999 section 23-5 | A New Tax System (Goods and Services Tax) Act 1999 section 23-10 | A New Tax System (Goods and Services Tax) Act 1999 section 38-190 | A New Tax System (Goods and Services Tax) Act 1999 section 38-355 | A New Tax System (Goods and Services Tax) Act 1999 Division 42 | A New Tax System (Goods and Services Tax) Act 1999 Division 142 | A New Tax System (Goods and Services Tax) Act 1999 Division 188

Reasons for decision: Detailed Reasoning - Should you have registered for GST?: An entity is required to be registered for GST if it meets the requirements of section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states: You are required to be registered under this Act if: (a) you are *carrying on an enterprise; and (b) your *GST turnover meets the *registration turnover threshold. (* Denotes a term that is defined in section 195-1 of the GST Act.) (There is no requirement that the entity carries on the enterprise in Australia.) You meet the requirement of paragraph 23-5(a) of the GST Act as you are carrying on an enterprise, even though you do not have an arm in Australia. Only your sales that are connected with Australia are included in the GST turnover calculation. Your sales to Australian customers are under $75,000 a year. Your GST turnover is below the registration turnover threshold of $75,000. Therefore, you do not meet the requirement of paragraph 23-5(b) of the GST Act. As you do not meet all of the requirements of section 23-5 of the GST Act, you are not required to be registered for GST. An entity is entitled to be registered for GST if it meets the requirement of subsection 23-10(1) of the GST Act, which states: You may be registered under this Act if you are carrying on an *enterprise (whether or not your *GST turnover is at, above or below the *registration turnover threshold) (There is no requirement that the entity carries on the enterprise in Australia) You are carrying on an enterprise. Therefore, you are entitled to be registered for GST. You may apply for cancellation of your GST registration as you are not required to be registered for GST. | Summary: You are liable for GST on your importations because: ● you enter the goods for home consumption; and ● the importations are not non-taxable importations. GST is payable on your sales of goods to Australian customers because: ● you supply the goods for consideration; and ● you supply the goods in the course or furtherance of an enterprise that you carry on; and ● your supplies of the goods are connected with Australia ● you are registered for GST; and ● these sales are not GST-free or input taxed. | Detailed Reasoning - Detailed reasoning: You make a taxable importation if you meet the requirements of subsection 13-5(1) of the GST Act, which 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. In your case, goods are imported into Australia and you ‘enter the goods for home consumption’ meaning that they are released by DIBP for use in Australia. Therefore, you meet the requirements of paragraphs 13-5(1)(a) and 13-5(1)(b) of the GST Act. The importations of the goods are not non-taxable importations. Therefore, you are liable to pay GST to DIBP as you meet all of the requirements of subsection 13-5(1) of the GST Act. This will continue to be the case even if you cancel your GST registration. An importer does not need to be registered for GST to have a GST liability on an importation. GST will be collected at the time of importation. GST is payable on your sale of the goods to Australian customers GST is also payable on taxable supplies. You make a taxable supply where you meet the requirements of section 9-5 of the GST Act, which 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, or *required to be registered. However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed. The indirect tax zone is similar to Australia. In your case, you meet the requirements of paragraphs 9-5(a), 9-5(b) and 9-5(d) of the GST Act, that is: ● you supply the goods for consideration (the sale price)(paragraph 9-5(a)); and ● you supply the goods in the course or furtherance of the enterprise that you carry on (paragraph 9-5(b)); and ● you are registered for GST (paragraph 9-5(d)). There are no provisions of the GST Act under which your sales of the goods to the Australian customers are GST-free or input taxed. Therefore, what remains to be determined is whether your sales of goods to Australian customers are connected with the indirect tax zone. Section 9-25 of the GST Act specifies when a supply is connected with the indirect tax zone. Relevantly, subsection 9-25(1) of the GST Act states; A supply of goods is connected with the indirect tax zone if the goods are delivered, or made available, in the indirect tax zone to the *recipient of the supply. Your supplies to Australian customers are connected with the indirect tax zone, as the goods are located in Australia at the time of making the sale, and you deliver or make available, the goods, in the indirect tax zone to the recipients of the supplies). Therefore, you meet the requirement of paragraph 9-5(c) of the GST Act. GST is payable on your sales of goods to Australian customers, as you meet all of the requirements of section 9-5 of the GST Act, The following facts are not relevant in determining whether GST is payable on your sales of the goods to Australian customers: ● your Australian customers order from your overseas based website ● your Australian customers pay you in the currency of the overseas country directly into your overseas business bank account These facts do not affect whether a sale of goods is connected with Australia. You will remit, to the ATO, your GST liabilities on sales to Australian customers and report these amounts in GST returns, which you will lodge with the ATO on a quarterly basis. However, if you do not reach the GST turnover threshold of $75,000, you may cancel your GST registration. In this situation, you will not be liable for GST on sales made on or after the cancellation date of effect because under such circumstances you would not meet the requirement of paragraph 9-5(d) of the GST Act. In accordance with paragraph 25-65(a) of the GST Act, if your GST registration cancellation is backdated, you will then be treated as though you were not registered on and after the cancellation date of effect for the purposes of determining whether GST is payable on sales you have made. In order to get a refund of any relevant GST amounts that you have passed on to customers and reported in a GST return, you must first reimburse the customer for the GST amount you charged them. | Summary: You are entitled to input tax credits on your importations of the goods because: ● you import these goods for a creditable purpose; and ● these importations are taxable importations; and ● you are registered for GST. You are entitled to input tax credits on your acquisitions from Australian suppliers where the supplies made to you are taxable supplies, for GST purposes, because under such circumstances: ● you make acquisitions for a creditable purpose; and ● the supplies made to you are taxable supplies; and ● you provide consideration for the supplies made to you; and ● you are registered for GST. | Detailed Reasoning - Detailed reasoning: Importations An entity is entitled to input tax credits on its creditable importations. An entity makes a creditable importation where it meets the requirements of section 15-5 of the GST Act, which states: You make a creditable importation if: (a) you import 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. You meet the requirements of paragraphs 15-5(b) and 15-5(c) of the GST Act. That is: ● the importations are taxable importations.(paragraph 15-5(b)); and ● you are registered for GST (paragraph 15-5(c)). Therefore, what remains to be determined is whether you import the goods for a creditable purpose. Section 15-10 of the GST Act defines creditable purpose in the context of importations. Subsection 15-10(1) of the GST Act states: You import goods for a creditable purpose to the extent that you import the goods in *carrying on your *enterprise. Subsection 15-10(2) of the GST Act states: However, you do not import the goods for a creditable purpose to the extent that: (a) the importation relates to making supplies that would be *input taxed; or (b) the importation is of a private or domestic nature. You import goods for a creditable purpose as: ● you import these goods in carrying on your enterprise; and ● the importations do not relate to making supplies that would be input taxed; and ● the importations are not of a private or domestic nature. Therefore, you meet the requirement of paragraph 15-5(a) of the GST Act. You are entitled to input tax credits on your importations of the goods, as you meet all of the requirements of section 15-5 of the GST Act, If you cancel your GST registration, you will not be entitled to input tax credits on importations made on or after the date of effect of cancellation of the GST registration. Acquisitions You are entitled to input tax credits on your creditable acquisitions. You make a creditable acquisition where you meet the requirements of section 11-5 of the GST Act, which states: You make a creditable acquisition if: (a) you acquire anything solely or partly for a *creditable purpose; and (b) the supply of the thing to you is a *taxable supply; and (c) you provide, or are liable to provide, *consideration for the supply; and (d) you are *registered, or *required to be registered. You meet the requirements of paragraphs 11-5(c) and 11-5(d) of the GST Act, that is: ● you are paying for supplies made to you (paragraph 11-5(c)); and ● you and you are registered for GST.(paragraph 11-5(d)). Section 11-15 of the GST Act defines creditable purpose in the context of acquisitions. Subsection 11-15(1) of the GST Act states: You acquire a thing for a creditable purpose to the extent that you acquire it in *carrying on your enterprise. Subsection 11-15(2) of the GST Act states: However, you do not acquire the thing for a creditable purpose to the extent that: (a) the acquisition relates to making supplies that would be *input taxed; or (b) the acquisition is of a private or domestic nature. You acquire things for a creditable purpose as: ● you acquire things in carrying on your enterprise; and ● your acquisitions do not relate to making supplies that would be input taxed; and ● your acquisitions are not of a private or domestic nature. Therefore, you meet the requirement of paragraph 11-5(a) of the GST Act. You meet the requirement of paragraph 11-5(b) of the GST Act where the purchase price of an acquisition has a GST component under the GST Act. Therefore, you are entitled to input tax credits on your Australian acquisitions, where the price you pay for these acquisitions has a GST component under the GST Act, as under such circumstances you would meet all of the requirements of section 11-5 of the GST Act. Input tax credits are offset against GST liabilities on sales in your GST returns that you lodge with the ATO, thereby reducing your net GST payable amount to the ATO. Your net GST liabilities to the ATO will be due when your GST returns are due. The tax invoices that your Australian suppliers issue to you will indicate whether their supplies to you are subject to GST and show or enable you to calculate the GST amount. Some supplies of things are GST-free or input taxed, which means they are exempt from GST. If you receive a GST-free or input taxed supply, you would not meet the requirement of paragraph 11-5(b) of the GST Act. Hence, you would not be entitled to input tax credits on your acquisitions of such things. There are a number of GST exemptions for various types of arrangements that have an international aspect. These GST exemptions can apply to, for example, transport and storage fees. It is the supplier’s responsibility for determining the correct GST treatment of their supplies. If you have concerns about a supplier’s GST treatment of a supply made to you, discuss this with the supplier in the first instance. See Goods and Services Tax Ruling GSTR 2004/7 (type in GSTR 2004/7 into an internet search engine); Goods and Services Tax Ruling GSTR 2003/7 and the fact sheet GST and international freight transport (type in fact sheet name into the search box of www.ato.gov.au). If you cancel your registration, you will need to re-register if the value of your supplies connected with Australia reaches $75,000 in any 12 months period, or you anticipate that your sales will reach $75,000 in the next 12 months. You will need to monitor this going forward. | Detailed Reasoning - Your GST compliance will be simpler if you cancel your GST registration: If you cancel your GST registration, this will make tax compliance simpler, as you would then not have any GST compliance obligations other than paying GST on importations. You would no longer be liable for GST on sales to Australian customers if you cancel your GST registration, as you would not meet the requirement of paragraph 9-5(d) of the GST Act if you do so. You would also no longer be required to collect GST, issue tax invoices, remit GST to the ATO or lodge GST returns under such circumstances. If you cancel your GST registration, you will no longer be entitled to input tax credits for the GST paid on importations or the GST components of the prices of Australian acquisitions.