Edited version of private ruling

Authorisation Number: 1011550666937

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Ruling

Subject: GST and Transport

Questions:

1. Is the place of consignment in Australia the warehouse as referenced via the overarching agreement between you and the Australian importer to transport the goods from overseas to its warehouse, or should you rely on the formal 'contract of carriage' such as the house bill of lading that shows the destination is the port?

2. Is your supply of customs clearance and sea cargo automation to the Australian importer GST-free or taxable?

3. Are the port service charges invoiced by an Australian resident shipping line to you GST-free or taxable, and if they are on-charged by you to the Australian importer, will they be GST-free or taxable?

4. Are the quarantine attendance charges invoiced by an Australian freight contractor to you GST-free or taxable, and if they are on-charged by you to the Australian importer, will they be GST-free or taxable?

5. Is the supply of domestic transport services in Australia for the transport of goods to the Australian importer's warehouse by an Australian subcontractor to you GST-free or taxable, and if it is subsequently invoiced from you to the Australian importer, will it be GST-free or taxable?

6. Is the supply of waiting time by the Australian subcontractor to you for the time taken to wait for picking up the container at the wharf GST-free or taxable, and if it is subsequently invoiced by you to the Australian importer, will it be GST-free or taxable?

7. Is the supply of storage by the Australian subcontractor to you in respect of storing the container at its premises whilst waiting for a suitable delivery time GST-free or taxable, and if they are subsequently invoiced by you to the Australian importer, will they be GST-free or taxable?

8. If the domestic leg of the transport related supplies in Australia (including trucking, waiting time, storage and port service charges) are GST free, should they be estimated at the time of import and be included as part of the value of taxable importation (VoTI) on the import declaration to attract GST on import? If they were based on estimation, what would happen if the actual costs are different to those estimated?

9. Is the international freight charged by an Australian resident shipping line to you to transport the goods from the origin port to the Australian port GST free or taxable, and will the subsequent invoice from you to the Australian importer that is used to calculate the VoTI be GST-free?

10. Is container detention charged by the shipping line to you for late return of the containers following delivery GST free or taxable, and if it is subsequently invoiced by you to the Australian importer, will it be GST-free or taxable?

Answers

1. The place of consignment in Australia is the warehouse according to the overarching agreement between the Australian importer and you. We acknowledge that both the Australian importer and you have acted in such a way that construes a contract for delivery of the goods to the Australian importer's warehouse and this is evidenced by the invoice raised to the Australian importer for services rendered over a period of time.

2. Your supply of customs clearance and sea cargo automation to the Australian importer is GST-free.

3. The port service charges invoiced by an Australian resident shipping line to you are GST-free, and they remain GST-free if they are on-charged by you to the Australian importer.

4. The quarantine attendance charges invoiced by an Australian freight contractor to you are taxable where the supply meets the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), and they will be GST-free if they are on-charged by you to the Australian importer.

5. The supply of domestic transport services in Australia for the transport of goods to the Australian importer's warehouse by the Australian subcontractor to you is taxable where the supply meets the requirements of section 9-5 of the GST Act. The supply will be GST-free if it is subsequently invoiced from you to the Australian importer.

6. The supply of waiting time by the Australian subcontractor to you for the time taken to wait for picking up the container at the wharf is taxable where the supply meets the requirements of section 9-5 of the GST Act. It will be GST-free if it is subsequently invoiced by you to the Australian importer.

7. The supply of storage by the Australian subcontractor to you in respect of storing the container at its premises whilst waiting for a suitable delivery time is taxable where the supply meets the requirements of section 9-5 of the GST Act. It will be taxable when subsequently invoiced by you to the Australian importer as we take the view that storage is not considered part of international transport.

8. Pure estimates are not allowable under the policy of the Commissioner of Taxation (Commissioner) and therefore, actual costs are preferred. Please see discussion below. However, under the scenario outlined the charges for storage and container detention while waiting for a suitable delivery time to the Australian importer will not be included in the VoTI.

9. The international freight charged by an Australian resident shipping line to you to transport the goods from the origin port to the Australian port is GST-free, and the subsequent invoice from you to the Australian importer that is used to calculate the VoTI will also be GST-free.

10. Container detention charged by the shipping line to you for late return of the containers following delivery is taxable. It will be GST-free when subsequently invoiced by you to the Australian importer if the container detention is caused while the containers await customs clearance as part of the international transport. It will be taxable however if the container detention is caused by the actions of the Australian importer to delay delivery of the container (for example, the Australian importer asks you to await a suitable delivery time).

Relevant facts and circumstances

The Australian importer sources products from overseas suppliers on FOB terms.

You have an informal agreement with the Australian importer to transport the goods from the FOB overseas port to the Australian importer's warehouse.

The house bill of lading for the transport of the goods covers transport from the origin port to an Australian port.

To fulfil your obligations, you contract a shipping line to bring the container to the Australian port on freight collect terms and subsequently to pay for the freight plus the related port service charges to the shipping line's office in Australia.

You also complete the customs clearance and sea cargo automation for the Australian importer at this time.

A third party Australian subcontractor is contracted by you to pick up the container from the wharf and deliver it to the subcontractor's premises for storage until such time that the Australian importer is able to accept it into its warehouse. The container will not be customs cleared when storage at the wharf is due to commence. As such, it is standard practice to move those containers under-bond from the wharf to a bonded warehouse to save on storage. The Australian subcontractor does not charge for the pickup at wharf and drop off to bonded warehouse as it is included in the rest of its charges. Once the container has been customs cleared, it will then be moved from the bonded warehouse to the Australian subcontractor's warehouse to await subsequent delivery to the Australian importer.

If Australian Quarantine and Inspection Service (AQIS) requires an inspection of the consignment then the container would be transported from the wharf to the freight contractor where inspection is carried out.

The Australian freight contractor then invoices you for the costs of having an AQIS officer attended the inspection. During the inspection the AQIS officer may decide that the goods require fumigation before they can be released. In this case the Australian freight contractor will fumigate the goods as required and invoice you for this service.

Finally, once the shipment is cleared through both customs and AQIS, the Australian importer can receive the goods into its warehouse. The Australian subcontractor delivers the container to the Australian importer. However, the Australian importer can only accept one container a day, and if there is a backlog, then the extra container are moved into storage until the Australian importer can receive the goods into its warehouse. The storage involves nothing extra from secure storage.

The Australian subcontractor will invoice you for the transport, any waiting time required to pick up the container and the storage for keeping the container at its premises.

You then invoice the Australian importer for international freight, port service charges, customs clearance, sea cargo automation, domestic transport, waiting time, storage, any applicable AQIS attendance fees and subsequent AQIS treatment costs associated with the consignment.

The shipping line may invoice you for container detention incurred due to late return of the container used in the shipment. There are generally 10 free days provided by the shipping line between container availability at the wharf and return of the container after delivery. It is possible that the container could still be at the Australian subcontractor or the freight contractor awaiting either clearance or a suitable delivery time when the 10 free days run out.

This means that the costs are incurred before the place of consignment if you use the informal overarching agreement to determine such, however it does not receive the invoice for this until weeks later. If this occurs then there is a subsequent invoice raised from you to the Australian importer for container detention.

Reasons for decision

GST-free supplies of international transport in general

Section 38-355 of the GST Act specifies the general rules for the GST-free supplies of international transport of goods and related matters. The purpose of this section is to allow only certain aspects of the supply of transportation of goods to be GST-free. The legislation is not intended to exempt all costs of transport of goods. If you are registered or required to be registered and you acquire goods or services for a creditable purpose for use in your business, then you are able to claim an input tax credit for the GST included in the price of the supply of the goods or services in accordance with section 11-5 of the GST Act.

Items 5 and 5A together in the table in section 38-355 of the GST Act allow for the GST-free transport of goods in certain circumstances:

The third column of this table sets out supplies that are GST-free:

In relation to the importation of goods, paragraph (b) of item 5 in the table in section 38-355 of the GST Act ensures that the supply of the international transport from outside of Australia to the port or airport of final destination in Australia continues to be GST-free but GST-free treatment may extend beyond this point if the place of consignment includes any further leg of Australian transport.

Hence, the term 'place of consignment' is important in as much as it defines the limits of the GST-free status afforded to international transport. The term is defined in section 195-1 of the GST Act:

place of consignment of goods means:

(a) if the goods are posted to Australia - the place in Australia to which the goods are addressed; or

(aa) if the supplier of the goods is to deliver the goods in Australia - the place in Australia to which the goods are to be delivered under the contract for the supply of the goods; or

(ab) if:

(i) neither paragraph (a) nor (aa) applies; and

(ii) the goods are to be transported into Australia by an entity supplying a transport service to an entity that is to import the goods into Australia;

the place in Australia to which the goods are to be delivered under the contract for the supply of the transport service; or

(b) in any other case - the port or airport of final destination as indicated on the *transportation document.

*Transportation is defined in section 195-1of the GST Act:

transportation document includes the following:

(a) a consignment note;

(b) a house bill of lading;

(c) an ocean bill of lading;

(d) a house air waybill;

(e) a master air waybill;

(f) a sea waybill;

(g) a straight line air waybill;

(h) a sub-master air waybill;

(i) other similar documents.

In addition, the Explanatory Memorandum to the Tax Laws Amendment (2010 GST Administration Measures No.3) Bill 2010 (EM) provides guidance for a transportation document. Paragraph 1.18 to 1.20 of the EM state:

1.18 The primary agreement for the importation of goods refers to the agreement under which goods are delivered into Australia under the contract for the supply of the goods or where a local entity brings the goods to Australia, the primary agreement is the agreement for the transport of the goods to Australia.

1.19 If goods from outside Australia are supplied to a local purchaser on 'delivered duty paid', 'delivered duty unpaid' or under 'cost, insurance and freight' terms, the primary agreement will be the supply agreement for the sale of the goods to the local purchaser. in contrast, the primary agreement under terms of trade involving 'free on board' will generally be the agreement between a transport company and a local importer in which the goods are transported from a foreign port or airport to the local importer.

1.20 The place where an Australian transport supplier delivers goods in Australia is the place of consignment for inbound goods from overseas if they can show that this is the final place in Australia to which the goods are required to be transported under the contract or arrangement for the international transport of the goods.

In your case, we take the view that you have an overarching agreement with the Australian importer to deliver their goods to their warehouse. This is backed up by your invoicing arrangements whereby you invoice the Australian importer to deliver the goods to their warehouse. In accordance with paragraph (ab) of the definition of place of consignment in section 195 of the GST Act, the warehouse is the place of consignment for the purposes of Item 5 in the table in subsection 38-355(1) of the GST Act.

Once the place of consignment is decided, it will determine both:

· the extent to which transport services and other services associated with bringing goods to Australia will be GST-free; and

· the extent of the transport and other service costs that need to be included in calculating the value of taxable importation (VoTI) needed to determine the GST liability on import.

Transport supplier who brings the goods to Australia

The supply of international transport of goods is GST-free for transport suppliers who bring the goods to Australia. In the current case you have been contracted by the Australian importer to bring the goods to Australia and deliver them to the warehouse. The supply by you will be GST-free.

The shipping line that brings the goods to Australia is also making a GST-free supply of international transport. The shipping line's supply of transport to you (including port service charges) will be GST-free.

Supplies of loading, handling and other services by you that facilitate the international transport of goods will also be GST-free.

Subcontractor who does not bring the goods to Australia

A subcontractor who has been subcontracted by another entity in Australia to provide transport or other services within Australia as part of an international transport supply will make a taxable supply. As such, the Australian subcontractor's supply of services to you will be a taxable supply.

Storage and container detention

As discussed, any transport services that you supply up to the place of consignment of the Australian importer's goods will be GST-free. This includes any loading or handling of the goods that are part of the transport and any other services that facilitates the international transport.

We take the view that any storage or container detention charges that are associated with the normal movement of the goods from the port to the delivery address form part of the international transport or alternatively facilitate that transport and therefore are GST-free. However where additional storage or container detention charges are incurred simply because the Australian importer wishes to delay delivery of the goods we take the view that these charges fall outside of the international transport and therefore will be subject to GST. Where costs such as storage and container detention while waiting for a suitable delivery time to the Australian importer are taxable they will not form part of the VoTI for the importation of goods.

In summary, the Commissioner generally does not allow the use of 'pure' estimates but will concede that a reasonable and verifiable methodology can be used in calculations. Where the initial calculation proves incorrect for an importation, the entry should be corrected by way of amendment.

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