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Edited version of your written advice
Authorisation Number: 1051276909491
Date of advice: 31 August 2017
Subject: Goods and services tax (GST) and sale of steel to a company
Is GST payable on your sale of the steel to company X, which will export the steel to an External Territory?
Relevant facts and circumstances
You are registered for GST.
Company X has contracted you to fabricate and supply structural steel to it. The steel is to be shipped by company X, or a shipping company hired by company X, to an External Territory, where it will be used in renovations/additions to a building, which is owned by company X.
Company X is an Australian company registered for GST.
You will have no involvement or responsibility in delivering the steel. You have been directed to deliver the steel to a holding yard within mainland Australia. This is where your involvement ends and the steel sale contract is complete.
Company X advised you that it will provide Export Declaration documents to you once the steel departs port. It is assumed that export to the External Territory will take place within 60 days after you issue the final invoice. It is assumed that company X will not be altering the fabricated steel, other than to prepare it for export.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-5
A New Tax System (Goods and Services Tax) Act 1999 section 38-185
Reasons for decision
Your sale of the steel is not GST-free under the export exemption because you, the vendor, are not the exporter and are not treated as being the exporter.
GST is payable by you on your taxable supplies.
A supplier makes a taxable supply if it meets the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states:
You make a taxable supply if:
(a) you make the supply for *consideration; and
(b) the supply is made in the course or furtherance of an
enterprise that you carry on; and
(c) the supply is *connected with the indirect tax zone; and
(d) you are registered or required to be registered.
However, the supply is not a *taxable supply to the extent that it is
*GST-free or *input taxed.
(*Denotes a term defined in section 195-1 of the GST Act)
The indirect tax zone includes mainland Australia amongst other things.
You meet the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. That is:
● you will sell the steel for consideration (the sale price)
● you will make the supply in the course or furtherance of your enterprise
● the supply is connected with the indirect tax zone (as you will supply the steel wholly within the indirect tax zone to the purchaser) and
● you are registered for GST.
There are no provisions of the GST Act under which your sale of the steel will be input taxed.
Therefore, what remains to be determined is whether your sale of the steel will be GST-free.
Item 1 in the table in subsection 38-185(1) of the GST Act provides that a sale of goods is GST-free if the supplier exports them from the indirect tax zone before, or within 60 days (or such further period as the Commissioner allows) after:
(a) the day on which the supplier receives any of the consideration for the supply; or
(b) if, on an earlier day, the supplier gives an invoice for the supply – the day on which the supplier gives the invoice.
Item 2 in the table in subsection 38-185(1) of the GST Act provides that a sale of goods is GST-free if it is a supply for which the consideration is provided in instalments under a contract that requires the goods to be exported, but only if the supplier exports the goods from the indirect tax zone before, or within 60 days (or such further period as the Commissioner allows) after:
(a) the day on which the supplier receives any of the final instalment of the consideration for the supply; or
(b) if, on an earlier day, the supplier gives an *invoice for that final instalment – the day on which the supplier gives the invoice.
The other items in the table are not relevant to your situation.
Where the vendor is not actually the exporter, they would then need to consider whether they are deemed to be/treated as the exporter for the purposes of the GST Act pursuant to subsection 38-185(3) of the GST Act.
Subsection 38-185(3) of the GST Act provides that a vendor of goods is treated, for the purposes of item 1 and 2 in the table in subsection 38-185(1) of the GST Act as having exported the goods from the indirect tax zone if:
(a) before the goods are exported, the supplier supplies them to a purchaser that is not registered or required to go be registered for GST; and
(b) the purchaser exports the goods from the indirect tax zone and
(c) the goods have been entered for export within the meaning of
section 113 of the Customs Act 1901; and
(d) since their supply to the purchaser, the goods have not been altered or used in any way, except to that extent (if any) necessary to prepare them for export; and
(e) the vendor has sufficient documentary evidence to show that the
goods were exported; and
(f) if the purchaser is covered by paragraph 168-5(1A)(c) of the GST Act – the vendor has a declaration by the purchaser stating that:
(i) a payment has not been sought under section 168-5 of the GST Act for the supply; and
(ii) if the goods are *wine – a payment has not been sought under section 25-5 of that Act for the supply.
However, if the goods are reimported into the indirect tax zone, the supply is not GST-free unless the re-importation is a *taxable importation.
The requirement that the purchaser exports the goods from Australia is only one of multiple requirements of subsection 38-185(3) of the GST Act. All of the requirements of paragraphs (a) to (f) must be met in order for the vendor to be deemed to be the exporter under subsection 38-185(3) of the GST Act.
In accordance with section 195-1 of the GST Act, the overseas destination is outside the indirect tax zone because it is an External Territory and External Territories are excluded from the meaning of indirect tax zone.
You are not considered the exporter of the steel under the circumstances in question as your activities do not fall within either scenario in paragraph 109 of Goods and Services Tax Ruling GSTR 2002/6, which states:
109. Against this policy background, we consider that the role of the supplier is sufficient to justify describing the supplier as the entity that exports goods from Australia, where:
(a) the supplier contracts at the supplier's own expense with an international carrier for the transportation of the goods to a destination outside Australia; or
(b )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.
The purchaser you sell the steel to will export the steel. However, as the purchaser is registered for GST, the requirement of paragraph 38-185(3)(a) of the GST Act is not met and therefore, you are also not treated as the exporter for GST purposes under the special deeming rule in subsection 38-185(3) of the GST Act.
(Note that the requirement at paragraph 38-185(3)(f) of the GST Act has not been failed in your case as that requirement can only potentially be failed if purchaser is an individual who resides in an External Territory, but your customer is not an individual.)
The Australian Taxation Office (ATO) letter dated (date), which you hold a copy of, only applies to the situation where the vendor of the goods is in actual fact the exporter. As you are not the exporter of the steel in question, that letter does not cover your situation. The letter does not discuss the scenario where the purchaser is the actual exporter. Different rules must be considered where the purchaser is the exporter.
The ATO letter dated (date) includes a fact sheet that sets out the rules for a sale of goods to residents of External Territories to be GST-free under the export of goods exemption. The letter advises that the export exemption applies in relation to the sale of goods to residents of External Territories where the sale of the goods meets those requirements set out in the fact sheet.
As you are not the exporter and are not treated as being the exporter, your sale of the steel is not GST-free under section 38-185 of the GST Act. The sale is not GST-free under any other provisions of the GST Act.
Therefore, as all of the requirements of section 9-5 of the GST Act are met, GST is payable on your sale of the steel to company X.
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