The Australian Government has chosen a “vendor model” for the collection of GST on low value imported goods, which will take effect from mid next year – a win for Australian retailers.
E-commerce giants including eBay international, Alibaba and Amazon have basically lost their battle against the Australian Government not to proceed with the GST law.
While the GST Low Value Goods Bill 2017 was passed by Parliament in June this year, it has since being delayed in the Senate, as a collection model for the tax hadn’t been figured at that time. Last week, however, in a win for Australian retailers Federal Treasurer Scott Morrison confirmed the Australian Government Productivity Commission’s model to collect 10 percent GST on low value imported goods, with a “vendor model” approach.
“The Australian Parliament recently legislated to apply the GST to low value imported goods from July 2018, using a streamlined collection model that places the responsibility for assessing, collecting and remitting the tax on foreign suppliers,” as written on the Australian Government Productivity Commission’s website.
From 1st July 2018 good valued $1,000 and under, purchased by Australian shoppers from overseas retailers will face taxes. Under the new legislation, the vendor collection model will be applied for the collection of GST on these goods in Australia, meaning vendors, including online marketplaces and redeliveries, will be responsible to assessing, collecting and remitting the GST on goods at the time of the sale.
The new law will also apply to Australian retailers that employ a drop shipment model, that is, shipping directly to Australia from outside the country.
The Productivity Commission (PC) has however confirmed that the model is not in its most perfect state, with room to improve, saying in its report: “the legislated model is the most feasible among the imperfect alternatives at this time.”
Alternative models pushed by e-commerce companies involve logistics companies collecting GST from sellers, which the PC says “could capture more revenue, but their feasibility is hampered by paper-based declaration processes still used for international mail,” adding that delivery service provider Australia Post would be forced to “negotiate agreements with a myriad of other postal services”.
Applying the GST to goods costing $1000 or less is a win for Australian retailers, according to Morrisson, as it removes the unfair advantage for foreign businesses and creates a level playing field to help Australian businesses grow and create more jobs and opportunities.
Morrisson says the Commission’s approach is the “most practical and achievable option and provides the industry with certainty”.
Suppliers with an Australian turnover of $75,000 or more in a one year period are required to register and charge GST under the plan.