ATO Interpretative Decision
ATO ID 2004/696
Goods and Services Tax
GST and supply of mineral ore to a common stockpile alongside a ship bound for overseasFOI status: may be released
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With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.
Issue
Is the entity, an ore supplier, making a GST-free supply under item 1 in the table in subsection 38-185(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it is contracted to supply a type of ore (type A ore) to a common stockpile alongside a ship bound for overseas?
Decision
Yes, the entity is making a GST-free supply provided the ore is exported within the 60 day period as required by item 1 in the table in subsection 38-185(1) of the GST Act.
Facts
The entity is an ore supplier. The entity enters into a contract to supply a certain type of ore to a purchaser (type A ore). Under the terms of the contract, the entity is required to deliver the type A ore to the port, where it is unloaded onto a common stockpile alongside a ship which has been engaged to carry the ore to a destination outside Australia.
After delivery into the common stockpile, the ore is blended with other similar ore delivered by a different supplier creating a new and specific blend of ore (type AB ore). The type AB ore is then loaded onto the foreign bound ship. The purchaser of the entity's type A ore is contracted to sell the blended type AB ore to a foreign customer.
The entity receives documentation from the Port Authority which:
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- Quantifies the amount of type A ore loaded
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- Identities the ship which was loaded, and
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- States the overseas destination of the loaded ship.
The entity and the purchaser are both registered for goods and services tax (GST).
Reasons for Decision
Under section 38-185 of the GST Act, certain supplies of goods, for consumption outside of Australia, are GST-free. The entity's supply of type A ore is a supply of goods. As such, the GST status of the supply of the type A ore is appropriately considered under section 38-185 of the GST Act.
Item 1 in the table in subsection 38-185(1) of the GST Act (Item 1) provides that a supply of goods is GST-free if the supplier exports the goods before, or within 60 days after, the earlier of consideration being received or an invoice being issued.
Therefore, under Item 1, a supply of goods that are exported is GST-free where:
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- there is a supply of goods
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- the supplier exports the goods from Australia, and
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- the export occurs before or within a 60 day period (or such further period as the Commissioner allows).
The entity is contracted to supply type A ore to the purchaser by delivering the type A ore to the port. Therefore, as the entity is making a supply of goods (type A ore), the first element in Item 1 is satisfied.
Item 1 further requires that the supplier exports the goods from Australia. Amongst other things, paragraph 22 of Goods and Services Tax Ruling GSTR 2002/6 provides that the requirement that the supplier is the entity that exports the goods is satisfied where the supplier is responsible for delivering the goods to the operator of a ship or aircraft who, or that, has been engaged by another party to transport those goods to a destination outside Australia.
Further, paragraph 119 of GSTR 2002/6 states:
In the case of 'break bulk' commodities and other goods that are carried out of Australia on board a ship without being packed in a freight container, the supplier exports where the supplier delivers the goods on board or alongside the ship.
The entity delivers the type A ore to the port and unloads it onto a common stockpile alongside the ship which has been engaged to carry the ore to an overseas destination. However, the supply will only be GST-free provided the goods are in fact exported. If the goods are not transported out of Australia, Item 1 will not apply.
The documentary evidence provided by the Port Authority shows that the goods supplied by the entity, that is type A ore, were loaded on board a ship engaged to carry those goods to an overseas destination. It follows that the type A coal was removed from Australia. Therefore, the second element of Item 1 is satisfied.
Provided the ore is exported within the 60 day period as required by the third element of Item 1 (or such further period as the Commissioner allows), the entity's supply of type A ore satisfies the requirements of Item 1 and will be GST-free supply.
Date of decision: 10 August 2004
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 38-185
subsection 38-185(1)
Related Public Rulings (including Determinations)
GSTR 2002/6
ATO ID 2003/14 ATO Interpretative Decisions overturned by this decision
ATO ID 2003/15
Keywords
Goods and services tax
Exports
Export of goods
GST free
Consumption outside Australia
GST supplies & acquisitions
Taxable supply
ISSN: 1445-2782
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