Edited version of private ruling

Authorisation Number: 1011662923218

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Ruling

Subject: GST and supplies of international transport

Question 1

Is your supply of 'door to door' services for the export of goods from Australia to a destination outside Australia GST-free in accordance with section 38-355 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer 1

Yes, your supply of 'door to door' services for the export of goods to a destination outside Australia is GST-free in accordance with section 38-355 of the GST-Act.

Question 2

Are you entitled to an input tax credit when you engage a subcontractor to supply you with transport services in Australia?

Answer 2

Yes, you are entitled to an input tax credit when you engage a subcontractor to supply with transport services in Australia.

Relevant facts and circumstances

You are registered for GST.

You operate a service for the export of goods from Australia to overseas destinations.

Your clients number non-resident individuals and non-resident companies. These entities are registered for GST.

In the course of your enterprise and to provide an integrated transport service, you engage the services of entities to provide you with transport services.

The subcontractors are registered for GST in Australia.

Reasons for Decisions

Issue 1Supply of services to clients

GST is payable on any taxable supply that you make.

The criteria for a taxable supply are set out in section 9-5 of the 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 Australia; 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).

For the supply of your services to be a taxable supply, all of the requirements listed in section 9-5 of the GST Act must be satisfied.

From the facts of your case, the supply of your services is for consideration, the supply is made in the course or furtherance of an enterprise that you carry on. The supply of your services is connected with Australia and you are registered for GST. As such, the requirements listed in paragraphs 9-5(a) to 9-5(d) of the GST Act are satisfied.

Furthermore, the supply of your services is not input taxed under any provision of the GST Act or any other Act. Therefore, what remains to be determined is whether the supply of your services is GST-free.

GST-free supplies

Section 38-355 of the GST Act species the general rules for the GST-free supplies of the international transport of goods and related matters.

You have advised that you provide services to your clients for the export of their goods to places outside Australia.

Item 5 in the table in section 38-355 of the GST Act (Item 5), allows for the GST-free transport of export goods in certain circumstances.

38-355 Supplies of transport and related matters

In relation to the export of goods, Item 5 states that the supply of international transport of such goods from their place of export in Australia to a destination outside Australia is GST-free under section 38-355 of the GST Act. Item 5 also stipulates that the transport of the goods within Australia is also GST-free provided it is supplied by the supplier of the international transport.

The term 'International transport' in relation to the export of goods is defined in section 195-1 of the GST Act to mean: the transport of the goods from their place of export in Australia to a destination outside Australia (including loading and handling within Australia that is part of that transport).

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

place of export of goods means:

(a) if the goods were posted from Australia the place from which they were posted; or

(b) if paragraph (a) does not apply and the goods were packed in a *freight container:

(i) the last place from which they where collected, or to which they were delivered, prior to being so packed; or

(ii) if subparagraph (i) does not apply -the place where they were so packed; or

(c) if the goods are self transported goods the place, or last place, from which the goods departed Australia; or

(d) if paragraphs (a), (b) and (c) do not apply - the place, or first place, where the goods were placed on board a ship or aircraft for export from Australia.

The Explanatory Memorandum to the Tax Laws Amendment (2010 GST Administration Measures No.3) Bill 2010 (EM) provides guidance on the place of export. Paragraph 1.14 provides that:

· the place of export for non-postal goods that are packed in a freight container is: the last place from which they were collected, or to which they were delivered, prior to being packed; or

· the place of packing in the freight container if the goods were produced at that place.

The EM explains that the international transport of containerised goods out of Australia by the prime transport supplier is GST-free from the last place the goods are collected (place of export) prior to containerisation until the place of delivery overseas.

You have advised that under the terms of agreement with your clients to export their goods from Australia to an overseas destination, you provide them with an integrated transportation service. This service includes the collection, handling, packing into freight containers, marking, and labelling. Also included is the transport of the containerised goods from Australia to a destination outside Australia. You are therefore supplying them with an international service when you export the clients' goods.

Based on the above, the international service that you supply to your clients to transport the containerised goods from the place of collection in Australia to a place outside Australia satisfies the requirement of Item 5 and is GST-free pursuant to section 38-355 of the GST Act.

Issue 2 Entitlement to input tax credits

As per the presented facts, in the course of carrying on your enterprise, you engage a subcontractor to provide you with transport services in Australia. We therefore need to determine whether in those circumstances, you make a creditable acquisition when you engage the subcontractor's services.

Section 11-20 of the GST Act provides that you are entitled to an input tax credit on your creditable acquisitions.

Goods and Services Tax Ruling GSTR 2006/4 deals with section 11-5 of the GST Act and lists the requirements that must be satisfied for an acquisition to qualify as a creditable acquisition and thus give rise to an input tax credit entitlement.

Section 11-5 of the GST Act provides that you make a creditable acquisition if:

(a) you acquire anything solely or partly for a creditable purpose;

(b) the supply of the thing to you is a taxable supply;

(c) you provide, or are liable to provide, consideration for the supply; and

(d) you are registered, or required to be registered for GST.

All of the four requirements set out in paragraphs 11-5(a) to 11-5(d) of the GST Act must be satisfied for you to be entitled to input tax credits on your acquisitions.

Subsection 11-15(1) of the GST Act states that you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise.

Furthermore, subsection 11-15(2) of the GST Act provides that you do not acquire the thing for a creditable purpose to the extent that:

(a) the acquisition relates to making supplies that would be input taxed; or

(b) the acquisition is of a private or domestic nature.

Based on the information provided, your acquisition of the transport services is in the course of carrying on your enterprise in Australia. As such, it meets the requirements of subsection 11-15(1) of the GST Act. Additionally, your acquisition is not in relation to making an input taxed supply and is not of a private or domestic nature. Therefore, the acquisition is for a creditable purpose and meets the requirements in paragraph 11-5(a) of the GST Act.

Whether or not the subcontractor makes a taxable supply to you, as required by paragraph 11-5(b) of the GST Act, depends on their circumstances. The subcontractor's supply to you is taxable only if the requirements of section 9-5 of the GST Act are satisfied.

As previously explained at issue 1, a taxable supply is defined as a supply that is made for consideration, in the course of an enterprise that an entity carries on. The supply is connected with Australia and the entity is registered (or required to be registered) for GST. However, if the supply is GST-free or input taxed, it is not a taxable supply.

From the given facts, you provide consideration to the subcontractor in return for their transport services. Accordingly, their supply to you satisfies the requirement in paragraph 9-5(a) of the GST Act. As the supply is made in the course of the subcontractor's enterprise, paragraph 9-5(b) of the GST Act is also satisfied. The supply is connected with Australia as it is done in Australia and they are registered for GST. Therefore, paragraphs 9-5(c) and (d) of the GST Act are also satisfied.

In that case, where the subcontractor makes a taxable supply of transport services to you, the requirement of paragraph 11-5(b) of the GST Act is also met.

The acquisition of the transport services also meets the requirements of paragraphs 11-5(c) and 11-5(d) of the GST Act, as you provide consideration and you are registered for GST.

As all the requirements of section 11-5 of the GST Act are met, you make a creditable acquisition and are entitled to an input tax credit provided you hold a tax invoice where the value of the supply made to you is more than $75.

Please note that the supply of the transport services by the subcontractor is not GST-free or input taxed under any provision in the GST Act.