GST implications
Scenario:
My business, Lanes Pty Ltd, is an Australian company that does international trading. During the 2016/17 tax year, we imported goods of 180,000, excluding freight and insurance charges of 17,000 and customs duty of 12,000. Our staff used 30,000 imported goods for private purposes.
We also exported goods of 100,000 which were invoiced on 1 November and was paid on 30 November 2016, but the actual export took place on 23 December.
During the same year, We also purchased computer services of 50,000 from overseas, 10% were used by staff privately.
What are the GST implications for my company?
Explanation:
Imports
GST is payable on imported goods that have entered in Australian for home consumption. GST is payable by the importer rather than the overseas supplier (GST Act s 13-50).
The GST is 10% of the importation value, which incorporates the customs, insurance, freight value. The customs value is based on the free on board (FOB) plus additional transport cost in indirect tax zone (Australian), including insurance and any customs duty or wine tax (GST Act s 13-20(2)).
Therefore, GST= 10*(180,000+17,000+12,000) = 20,900
A special deferred GST scheme enable approved importers to defer the GST until the first business activity statement (BAS) is submitted after the foods are entered for home consumption subject to certain conditions. The deferral results in GST being cancelled out as input tax credit will be claimed in the same BAS return. This improves the cash flow as they are not required to pay GST ‘upfront’ (see GST Ruling GSTR 2003/15 Generally).
To be able to claim the GST credit, that taxable importation must be for “creditable purposes” (see GST Ruling GSTR 2008/1). As the staff used 30,000 imported goods for private purpose, the input tax credit is reduced in GST Act s 11-30(3):
Full input tax credit*extent of creditable purposes* extent of consideration
=20,900*(180,000-30,000)/ 180,000) =17,347
Exports
The supply of exports is GST-FREE if the supplier exports them from indirect tax zone (Australian) before, or within 60 days after receiving any of the consideration. Where the goods have been invoiced before any payment is made, they must be exported before or within 60 days after the invoice is given (GST Act s 38-185(1)). Therefore, your company's export is GST free as it is within 60 days (it is 53 days from 1 November to 23 December).
When a supplier re-imports goods back into the indirect tax zone, the supply is generally not GST-free. However, Lane exported goods and then returned to the indirect tax zone without any treatment, repair or alteration, they will still recognize as a non-taxable importation.
Offshore suppliers of services
A reverse charge rule may apply where an overseas provider supplies something other than goods or real property (GST Act Div 84). If the service is not provided through an Australian enterprise, it would not relate to Australia and GST will not apply.
To overcome this situation, GST will apply given the following conditions are satisfied:
- The supply is not related to Australia
- The recipient is registered or required to be registered
- The supply is provided in return for consideration
- The recipient acquires the goods/services supplied at least partly for the purposes
- The recipient does not acquire the supplied goods/services wholly for a creditable purpose
In this case, the services will be subject to GST and will be payable under s 84-10. GST=10*50,000 (Price of supply) =5000
However, as services provided privately for staff, the input tax credit is 10% more or (11/10) 110% of the credit that under the normal rules as it is a taxable supply (s 84-13).
Full input tax credit*extent of creditable purposes* extent of consideration
=5,000*(50,000+5,000)/ 50,000) =5,500