Thursday, 27 July, 2006
GST Ruling 2005/6 and it's effect on DDU / DDP Transactions
Dear {Firstname},
The Australian Taxation Office (ATO) has released its Goods and Services Tax Ruling (GSTR) 2005/6 in regard to the scope of Sub Section 38 - 190 (3) of the GST Act 1999 (' the ACT') .
This Ruling was previously Draft Ruling GSTR 2003/D7 and has significant implications for AFIF members.
In particular the ATO contends that the supply of Transport and Customs related Services supplied to a non-resident is subject to GST, if the consignee is in Australia. This would in most cases relate to Delivered Duty Paid (DDP) and Delivered Duty Unpaid (DDU) transactions.
Industry had previously raised its concerns with the ATO regarding the original Draft Ruling , particularly in regard to:
- the contractual obligations and arrangements with non-resident customers;
- the nature of the supply and whether the services are actually provided to another entity in Australia;
- the potential for the GST to be a cost to Australian Businesses, as GST paid may not be able to be passed on ;
- the inconsistent treatment of these services when compared to other countries that have GST & VAT Laws ;
- the increased compliance cost for resident and Non-Resident Businesses;
- ATO admin costs.
However, without further consultation and despite previous discussions, the ATO released the Ruling GSTR 2005/6.
Due to the complexity of the Ruling and its effect on service providers in this industry, AFIF, CBFCA and CAPEC, in noting the particular impact on their respective members, came together to address key concerns with the ATO. Association representatives met with the ATO Assistant Commissioner responsible for GST issues on 11 April 2006 to determine the ATO's compliance requirements of the Ruling. The Associations also wrote to the Commissioner of Taxation on 28 June 2006 to follow up the meeting in April.
Following a further meeting held subsequently with the Assistant Treasurer's Office in conjunction with the ATO, AFIF, CBFCA and CAPEC has commissioned PricewaterhouseCoopers (PWC) to prepare a submission to the Assistant Treasurer to address the key implications of the Ruling and propose legislative and administrative solutions for our members.
It is envisaged that a submission will be ready to go to the Assistant Treasurer (and copied to ATO) by early August. PWC will also draft a letter to ATO to request the suspension of ATO audits and retrospective action until this matter is finally determined.
In the interim however, members should note the current standing of the ATO on the Ruling and implications in relation to their compliance position.
Please click HERE to view the Ruling.
The essence of this issue is encapsulated in Examples 13 (para's 419 - 430) & Example 14 (para's 431- 435) on pages 74 - 76 of the document.
Please discuss this with your Financial Controller / Accountant and/or Tax Agent and advise all concerned.
Thanks and regards,
Brian Lovell
Chief Executive Officer
Australian Federation of International Forwarders Ltd (AFIF)
Suite 403, Level 3
152 Bunnerong Road
Eastgardens
NSW 2036
Tel: (61 2) 9314 3055
Fax: (61 2) 9314 3116