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Taxing importation of digital products and low value goods

Existing GST framework on importation

For importation to be taxable:

  1. It must be of tangible personal property
  2. The tangible property must not be of low value i.e custom value $1000 or less.

Which means internet purchases of digital product, certain services and low value goods were out of the scope of GST leaving an unequal playing field for Australian businesses

However the government has introduced amendments that extend GST to supplies of digital products, certain services and low value goods imported by consumers.

As a result of these amendments, Australian consumers will soon find themselves paying 10% more for many online purchases.

APPLYING GST TO DIGITAL PRODUCTS & OTHER SERVICES

Amendments to the GST Act1, which took effect from 1 July 2017, extend the scope of the GST to digital products and other services imported by Australian consumers.

Australian consumer
As a result of the amendments, a supply of digital products and other services will be connected with Australia (and therefore potentially a taxable supply) if the recipient of the supply is an “Australian consumer”.

An Australian consumer, in relation to a supply, is an Australian resident (as defined for income tax purposes) who is not entitled to an input tax credit (ITC) in respect of the acquisition.

To be entitled to an ITC, a consumer must be registered for GST and the supply must be acquired to some extent for an enterprise they carry on.

The amendments are therefore intended to capture private consumption only.

Source: taxandsupernewsroom.com.au

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