Private ruling: GST and internet sales
Published: March 2012

Ruling: Q1: Is GST payable on the sale of goods which are delivered direct from your supplier overseas to your Australian-based customer? | A1: No.


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 Subsection 9-25(1). A New Tax System (Goods and Services Tax) Act 1999 Subsection 9-25(3). A New Tax System (Goods and Services Tax) Act 1999 Section 195-1.

Reasons for decision: Summary: The sale of goods which are delivered direct from your overseas supplier to your Australian-based customer is not a taxable supply. Hence, you are not liable to pay GST on the sale of the goods. | Detailed Reasoning - Detailed reasoning: You are liable to pay the GST on any taxable supply that you make. Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) sets out the requirements of a taxable supply and it states: You make a taxable supply if: · you make the supply for *consideration; and · the supply is made in the course or furtherance of an *enterprise that you *carry on; and · the supply is *connected with Australia; and · you are *registered, or *required to be registered for GST. However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed. (* denotes a term defined in section 195-1 of the GST Act.) All of the requirements of section 9-5 of the GST Act must be satisfied for the sale of the goods to be a taxable supply. You have advised that you sell goods to your Australian-based customers who purchase the goods from your website. The goods are delivered directly from your overseas supplier to your Australian-based customers. In your case, you are registered for GST and the sale of the goods to Australian-based customers is for consideration made in the course of your enterprise. Therefore you satisfy the requirements of paragraphs 9-5(a), 9-5(b) and 9-5(d) of the GST Act. Furthermore, the sale of the goods in the circumstances described is neither GST-free nor input taxed. It remains to be determined whether the supply is connected with Australia under paragraph 9-5(c) of the GST Act. | Detailed Reasoning - Supplies connected with Australia: Section 9-25 of the GST Act sets out the circumstances under which a supply is connected with Australia. In this case, of relevance are subsections 9-25(1) and 9-25(3) of the GST Act, which state: | Detailed Reasoning - Supplies of goods wholly within Australia: (1) A supply of goods is connected with Australia if the goods are delivered, or made available, in Australia to the recipient of the supply. | Detailed Reasoning - Supplies of goods to Australia: (3) A supply of goods that involves the goods being brought to Australia is connected with Australia if the supplier either: · imports the goods into Australia; or · installs or assembles the goods in Australia. Goods and Services Tax Ruling GSTR 2000/31 explains when a supply is connected with Australia under section 9-25 of the GST Act and Goods and Services Tax Ruling GSTR 2003/15 provides an explanation on the importation of goods into Australia. Supplies of goods wholly within Australia Paragraphs 45 to 49 of GSTR 2000/31 cover the circumstances when a supply of goods is made wholly within Australia under subsection 9-25(1) of the GST Act. Subsection 9-25(1) of the GST Act provides that a supply of goods is connected with Australia if the goods are 'delivered, or made available', in Australia to the recipient of the supply. The recipient, in relation to a supply, is the entity to which the supply is made. In the context of subsection 9-25(1) of the GST Act, goods are delivered in Australia if the goods are physically delivered in Australia. Goods are made available in Australia if the goods are physically made available in Australia. Goods which are delivered or made available in Australia to the recipient may be goods that the supplier has acquired domestically or imported. Paragraph 49 of GSTR 2000/31 provides that where the recipient imports the goods into Australia, the supply of goods is not connected with Australia under subsection 9-25(1) because the goods are not delivered, or made available in Australia to the recipient of the supply. In your case, the goods are delivered directly from your overseas supplier to the customer's address in Australia. The terms and conditions of the sale provide that your customer is responsible for importing the goods into Australia. You never physically receive or handle the goods yourself. As the goods are not imported by you as the supplier, subsection 9-25(1) of the GST Act is not satisfied because you do not actually deliver or make the goods available in Australia to the recipient of the supply, your Australian-based customer. | Detailed Reasoning - Supplies of goods to Australia: Paragraphs 52 to 56 of GSTR 2000/31 cover the situation when a supply of goods is brought to Australia under subsection 9-25(3) of the GST Act. The ruling provides that a supply of goods is connected with Australia under subsection 9-25(3) of the GST Act if the supply involves those goods being brought to Australia and the supplier either imports the goods into Australia or installs or assembles the goods in Australia. The import of the goods into Australia or the installation or assembly of the goods in Australia is a supply of goods to Australia. While subsection 9-25(3) of the GST Act applies to supplies that involve goods being brought to Australia, a connection with Australia only exists if the supplier either imports the goods into Australia or installs or assembles the goods in Australia. Paragraph 72 of GSTR 2003/15 explains that supplies of goods to Australia are connected with Australia if the supplier imports the goods. A supplier imports goods where the supplier causes the goods to be brought to Australia for its own purposes and completes the customs formalities. Paragraph 147 of GSTR 2003/15 provides that an entity completes the customs formalities where that entity's name appears on the import entry as 'owner'. This occurs where the entity completes the entry itself, or engages a customs broker. In your case, the terms and conditions of the sale provide that your Australian-based customer is responsible for importing the goods into Australia. Your customer will be responsible for the completion of any customs entry formalities. As you are not the importer of the goods and you do not install or assemble the goods in Australia, subsection 9-25(3) of the GST Act is not satisfied. The sale of goods to your Australian-based customers is not connected with Australia under section 9-25 of the GST Act. As such, the requirement in paragraph 9-5(c) of the GST Act is not satisfied. As not all the requirements of section 9-5 of the GST Act are satisfied the sale of goods which are delivered direct from your overseas supplier to your Australian-based customer is not a taxable supply. Hence, you are not liable to pay GST on the sale.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You are a goods retailer. | You have a distribution agreement with an overseas supplier for the sale of the goods in Australia. | Previously you have imported the goods and placed them on the shelf and sold to your Australian-based customers. | You have now built a website with your goods for sale online so that you can directly compete with other companies who are selling into your dealer region. You will have a very low percentage of mark up compared to locally stocked parts but your costs should be reduced as well. | Your customers will access your website to place their order and make payment. You will then authorise the order to be placed with your overseas supplier. Under your arrangement with your overseas supplier, the goods ordered will be delivered by your overseas supplier directly to the customer's address. You will then pay your overseas supplier for the goods delivered directly to your customer. | You provided an extract of the terms & conditions from your website which provided that: | · The customer is purchasing goods mostly manufactured overseas. | · The customer is deemed to be the importer into their country. | · You are not responsible for local tax and duty that may be payable on goods you import from overseas. | If the parts are imported into Australia, the customer may be required to pay GST upon import. | The customer will receive an invoice when the online transaction is completed. A customs copy of the itemized invoice, from the overseas supplier, for the products purchased will be attached to the package when it is shipped. | The customers must also agree to the terms of the warranty which is provided by the overseas supplier. In case of warranty claims, the customers will contact the overseas supplier directly. | When the customers access your website they are aware that the parts are sourced overseas. The prices shown on your website also show the list price set by your overseas supplier. These prices do not include any duty or taxes payable. The airfreight you charge your customers is currently a fixed amount. However, generally the customers pay any additional freight costs. | The parcels are not normally insured when in transit. However, where the customers request, the parcels can be insured and the customers will pay the additional charges. | The price of the parts is from $1 to over $1,000. Depending on the size and weight of the parts, they are delivered to the customer via post or air freight service. | The documentation on the parcels only shows the details of your customers. Where required, Australian Customs and Border Protection Service (Customs) will contact your customers and they will be the ones who will complete customs formalities and pay any taxes on the importation.