GST paid to Customs for imported goods - Invoice Basis
When importing goods from overseas, GST is levied at 15% of the landed-cost of the goods and is payable to the Customs agent, not your overseas supplier. The GST paid to Customs needs to appear in box 13 of the GST return*, so you need to create one purchase order (bill) to record the overseas purchase and another purchase order (bill) to record the costs associated with the import.
A Customs agent is usually employed to handle the costs associated with the import. Generally, the Customs agent will arrange payment for, and collection of, the goods on arrival in New Zealand, and may pay your customs duty, freight, insurance and GST liability. You will need to reimburse the Customs agent for these costs.
*This support note is for businesses reporting their GST on an Invoice Basis. Our support note GST paid to Customs for imported goods - Payments Basis is for those reporting on a Payments Basis.
Ensure a Liability Account for GST Input Tax Adjustments exists in your software. By default this account should exist, but you can create it if required. This account will hold the GST paid by you to the Customs agent and will be reflected in box 13 of the GST return. See our example account below.
Note: This account should be linked to the GST return as shown below.
Go to the Accounts command centre and click Prepare GST return.
Select the GST Input Tax Adjustments account in Box 13.
Once this account has been set up there are two ways in which you can record the transaction:
(1) Record the overseas purchases, treating the import costs as expense items, or
(2) Record overseas purchases, including all costs in the item value.
To record overseas purchases, treating import costs as expense items
- Create an Expense (or Cost of Sales) account for the Customs Agent's charges. See our example below.
Create a bill (Purchases > Enter Purchases) to record the purchase from the overseas Supplier as normal, excluding the GST. If the supplier charges you freight, this needs to be included on this bill. Here's our example:
Create a separate bill for the import costs paid to the customs agent.
- Enter the Import Agent's/Customs' charges, using the E GST Code to exclude any GST.
- Enter the value of the total GST on the Import, using the Allocation Account of GST Input Tax Adjustments. Code this line as GST Exempt.
- For the import duty charged by the customs agent use the expense account created above.
- For any other expenses the Customs agent may be charging you, for example overseas freight and/or insurance, enter as below, selecting the applicable expense account and GST Code E. See our example below
Note: This transaction will increase expenses and include GST on the return.
A GST return prepared from the Accounts command centre should now show the value from step 3 above in Box 13.
To record overseas purchases, including all costs in item value
Create an Expense (or Cost of Sales) account for the Customs Agent's charges. See our example below.
- Create a new item called GST on Imports. Indicate that the item is 'I buy' only and that the Expense account it is linked to is the GST Input Tax Adjustments account. This will prompt a warning that costs are usually allocated to an Expense account - disregard this warning.
Click the Buying Details tab and select E as the GST code for buying, then click OK.
- Record the initial purchase of goods from the supplier as shown in our example:
Record a separae bill for the costs paid to tyhe Customs Agent. To enter the bill, select an item layout.
Enter a line on the purchase for the item created above. Enter the price as the value of GST paid to customs.
Enter extra lines for each item that the import bill applies to. Add a portion of the freight/insurance costs to each line. See our example below.
Note: You must enter zero quantities in the received column. This is because you want to increase the stock's total value only and not the quantity on hand.
This transaction will increase the average cost of the item(s) and include GST on the return.
Note: When completing your GST Return make sure the GST Input Tax Adjustments account is entered.