ATO Interpretative Decision
ATO ID 2013/37
Goods and Services TaxGST and ship's stores
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Is the entity making GST-free supplies of ship's stores to passengers and crew under item 5 in the table in subsection 38-185(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells certain types of merchandise on board a ship undertaking an international voyage?
No. The entity is not making GST-free supplies of ship's stores to passengers and crew.
The entity makes retail sales on passenger cruise ships. Sales are made to passengers and crew while the ship is in Australia. The ship is to depart on a voyage which has a destination outside Australia.
The merchandise sold to passengers and crew include:
- fashion clothing and accessories, electronic goods, cameras and jewellery;
- bottles of alcohol and cartons of cigarettes that are not made available for consumption during the cruise, and
- perfumes and cosmetics.
Reasons for Decision
The on board sale of ship's stores is a GST-free export of goods where item 5 in the table in subsection 38-185(1) of the GST Act (Item 5) is satisfied. Item 5 requires that:
- there is a supply of goods that are ship's stores;
- the goods are for use or consumption on a ship; and
- the ship is on a voyage which has a destination outside Australia (international voyage).
In this case, the ship is on an international voyage and it is necessary to consider the first two requirements only. To meet Item 5, goods sold through a retail store on board must be properly regarded as 'stores'. If the goods are of a type capable of being stores those goods must be supplied for the purpose of being used or consumed on board the ship by, in this instance, the purchaser.
'Ship's stores' takes its meaning from section 130C of the Customs Act 1901 and is defined as 'stores for the use of the passengers or crew of a ship, or for the service of the ship'.
Goods of a type normally considered to be stores are general provisions for the comfort and consumption of passengers and crew whilst they are on board the ship and consumables necessary for the operation and maintenance of the ship. Accordingly goods that are intended to be consumed by a person on board the ship such as food, water, beverages and tobacco, and goods that are intended to be consumed in the operation and maintenance of the ship such as fuel, are commonly regarded as ship's stores.
Durable goods - fashion clothing and accessories, electronic goods, and jewellery
Durable goods have a long life span and usage period, therefore it can be expected that these types of goods will be removed from the ship by the purchaser and used over a long period of time beyond the cruise.
Goods sold that are of a durable nature will not be ship's stores if it cannot be established that the goods are specifically for the purchaser's use on the cruise. Use, in this context, would include goods that make the cruise more comfortable and excludes goods that are more relevant to use after the cruise.
The supply of a beach towel on luxury cruise ship that has a swimming pool or the supply of a sunhat would be durable items that would be GST-free ship's stores because these goods would specifically be for the purchaser's use on the cruise.
However, durable goods such as fashion clothing and accessories, electronic goods, and jewellery sold on board will not be GST-free ship's stores because they would be mainly relevant to use after the cruise.
Consumables - Alcohol and tobacco that is not made available for consumption during the cruise
Alcohol and tobacco are normally considered to be stores when they are supplied for the consumption of passengers and crew whilst on board the ship. Where it is known when the goods are sold that the goods will not actually be used or consumed on board, for example bottles of alcohol and cartons of cigarettes which must be taken ashore when the passenger disembarks, the goods will not be GST-free supplies of ship's stores.
Consumable - Perfumes and cosmetics
These goods are sold in quantities whereby it is not reasonable to expect that they will be substantially consumed on board the ship on a cruise of a short duration. Therefore, goods of this kind are not in the nature of general provisions and are therefore not capable of being stores. Accordingly these items will not be GST-free supplies of ship's stores.
Note: Goods that are in the nature of general provisions including hygiene and medicinal products, accessories of a protective nature, clothing relevant to a cruise, batteries for electronic goods and souvenir items would be considered ship's stores. GSTR 2003/4 provides further guidance on what goods are ship's stores for the purposes of Item 5.Date of decision: 02 July 2013 Customs Act 1901
Related Public Rulings (including Determinations)
Goods and services tax
Goods consumed on international flights or voyages
Export of goods
GST imports and exports