GST on imports looks straightforward until it hits the BAS. You enter the customs amount, apply GST on imports, reconcile the payment, and move on, and then at quarter end the BAS payable looks inflated or the input tax credit does not tie back to what you expected. The reconciliation is fine and the payment to customs is matched, so it is tempting to assume the report is wrong. It usually is not. Import GST is treated differently from ordinary GST on purchases, and if it is coded even slightly wrong, reconciliation will not catch it but the BAS will.
Why GST on imports flows differently to the BAS
On a normal purchase you enter a GST-inclusive amount and Xero extracts one eleventh of it as GST. Import GST does not work that way. Your overseas supplier does not charge Australian GST, so the goods cost carries none at all. The GST is charged separately at the border, on the value of the taxable importation, and often the only Australian GST figure you are recording is the payment to customs or the freight forwarder. That is why Xero has a dedicated GST on Imports tax rate. It treats the entire line as GST rather than backing out one eleventh, so you can record just the GST component and have it flow to your input tax credit, without inventing a grossed-up purchase that never happened.
Where the import coding goes wrong
The most common error is coding the import as a standard purchase with GST on Purchases instead of the GST on Imports rate. When that happens, Xero calculates one eleventh of the amount instead of treating it as pure GST, and the BAS position shifts even though the bank still reconciles. The same thing happens on CSV and bank imports, where the line defaults to the contact or account's usual tax rate, almost always GST on Purchases, rather than the import rate. A related trap is entering the GST amount in the unit price but leaving the tax rate unset, so the figure lands but the treatment does not. And if the import relates to capital or inventory items, the wrong account selection can push it into the wrong part of the Activity Statement, since capital and non-capital purchases are reported separately.
How to fix GST on imports in Xero
Do not adjust the final BAS figure to make it look right, because that hides the cause and it comes back next quarter. Go to the transaction and confirm the GST on Imports rate was actually used, not GST on Purchases. Check that nothing came in by CSV or bank feed with a defaulted tax code, and make sure the account selection matches how the import should be reported. If the business is registered for the deferred GST scheme, also confirm the deferred amount is being handled correctly, since a partial entry there is a common reason import GST looks inflated. Import GST is not complicated, but it is specific. Fix the tax treatment at the source, and the BAS almost always corrects itself before lodgement.
