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Ruling

Subject: GST and export of goods

Question:

Is an Australian company (you) making a creditable acquisition of goods where you purchase the goods on a direct to container terminal (DCT) basis for export overseas within 60 days?

Answer:

Yes, you are making a creditable acquisition of the goods for export overseas and are entitled to claim input tax credits (ITC) because the supply of the goods to you is not GST-free when you (as the recipient), and not the supplier, have exported the goods from Australia.

In some circumstance, where the supplier has delivered the goods into the custody of the operator of a ship (for export outside Australia) and the supplier has documentary evidence of the particular acts, the supply of the goods to you is GST-free, and you will not be entitled to claim an ITC on the acquisition.

Relevant facts:

An Australian company (you) purchases certain goods from a supplier(s), for export to overseas buyers.

The goods are purchased on a 'delivered to container terminal' (DCT) basis from the supplier, via a broker(s).

The goods will be exported within 60 days from Australia.

You book the vessel and have the full container load (FCL) delivered to the supplier, who packs and sends the FCL to the wharf after clearance/inspection with the Australian Quarantine and Inspection Service (AQIS).

Once the vessel sails a certain certificate is issued by AQIS.

You have provided a copy of the standard contract which provides (amongst other things), that the delivery is to a terminal/port as nominated by you (as the buyer). All costs/charges to DCT are for the account of the seller. All costs/charges after DCT are for the account of the buyer. Insurance up to and including DCT is for the seller's care and account. Insurance after DCT is for the buyer's account.

Additional information provided:

In relation to the sequence of events for your purchase and exportation:

You purchase grains goods from a supplier in Australia (in your own right, and not as agent for the overseas buyers) for which you on-sell to the overseas buyers. That is, you will be selling the goods to the overseas buyers in your own right as principal.

The supplier will deliver the goods to a terminal/port in Australia as nominated by you.

Under your arrangement with the supplier, you will book the vessel and the full container load ('FCL'). The FCL will be delivered to the supplier, who packs and sends the FCL to the wharf after clearance with AQIS.

After the cargo is released by the supplier and the vessel has sailed, a certain certificate is issued by AQIS. You are liable for the costs to AQIS.

The goods reach the destination outside Australia.

In relation to your arrangement with the supplier:

You advised that the packer (of the goods into the FCL) is the supplier (that is, same entity).

The broker contracts with the supplier (packer) for their goods/services.

The packer performs their services at their premises in Australia.

You confirmed that you book the vessel. You contract with, and are liable for the expenses to, the international carrier for the transportation of the goods outside Australia.

The supplier (packer) is responsible to deliver the goods to the terminal/port nominated by you.

You will make payments for the goods to the supplier (packer) within XX days after delivery.

In some circumstance, the supplier (packer) is responsible for delivering the goods to the operator of a ship or aircraft to transport the goods outside Australia.

You are stated as the 'exporter' on the export documentations. The sample copies of the request for permit (RFP) to export prescribed goods and the certificate are provided, and named you as the exporter of the goods. The RFP shows: you (as the exporter) and an overseas buyer; where and when the goods are to be inspected by ASIQ; and the departure date; details of loading port; shipping company, final destination; and shipment. The corresponding certificate for this shipment was issued by ASIQ, shows you (as the exporter) and the overseas buyer.

Our records indicate that you are registered for goods and services tax (GST). For the purposes of this ruling, the supplier (packer) is registered for GST.

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

Input Tax Credits

Under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), you are entitled to claim input tax credits (ITC) on any creditable acquisitions you make.

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

· you acquire anything solely or partly for a creditable purpose; and

· the supply of the thing to you is a taxable supply; and

· you provide or are liable to provide consideration for the supply; and

· you are registered or required to be registered for GST.

You acquire a thing for a creditable purpose to the extent that you acquire the thing in carrying on your enterprise. However, you do not acquire a thing for a creditable purpose to the extent that the acquisition relates to making input taxed supplies or is of a private or domestic nature.

The facts indicate that you have satisfied paragraphs 11-5(a), 11-5(c) and 11-5(d) of the GST Act because you have acquired the grains (goods) for a creditable purpose, you have or will provide consideration, and you are registered for GST.

What remains to be determined is whether the sale of the goods to you is a taxable supply (as per paragraph 11-5(b) of the GST Act).

Is there a taxable supply to you?

GST is payable on a taxable supply under section 9-5 of the GST Act, which states:

You make a taxable supply if:

· you make the supply for *consideration; and

· the supply is made in the course or furtherance of an *enterprise that you *carry on; and

· the supply is *connected with Australia; and

· 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 defined term in section 195-1 of the GST Act)

The supplier satisfies all the requirements under paragraphs 9-5(a) to 9-5(d) of the GST Act as follows:

· the supplier makes the supply for consideration;

· the supply is made in the course or furtherance of their enterprise;

· the supply is connected with Australia as it involves goods being removed from Australia; and

· the supplier is registered for GST.

However, the supply is not taxable to the extent that it is GST-free or input taxed.

There are no provisions under the GST legislation in which the supply of the goods could have been input taxed in the circumstances described. The GST-free provisions are taken into consideration.

Export of Goods

Section 38-185 of the GST Act discusses the GST-free exports of goods. Of relevance is item 1 in the table in subsection 38-185(1) of the GST Act (Item 1) which states:

Goods and Services Tax Ruling GSTR 2002/6 covers the export of goods.

For the supply to be GST-free under Item 1 the supplier must export the goods from Australia before, or within 60 days (or such further period as the Commissioner allows).

Paragraph 22 of GSTR 2002/6 states:

22. The requirement that the supplier is the entity that exports the goods is satisfied where either:

· 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

· 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; or

· the requirements of subsection 38-185(3) are met (see paragraphs 67 to 81).

In relation to point (b) in paragraph 22 of GSTR 2002/6, the documentary evidence must show that the goods were delivered by the supplier on board a ship or into the control of a ship or aircraft operator, and that the ship or aircraft operator has been contracted to carry the goods to a destination outside Australia.

Further paragraphs 110, 118, 121, and 125 of GSTR 2002/6 state:

110. This approach recognises that the supplier has put the goods into a position which means that the goods are for export and not for use or consumption in Australia. Also, in each case, it is the acts of the supplier alone which determine whether the supplier satisfies the primary element of a GST-free export (i.e., 'the supplier exports'). The supplier has access to documents which evidence the particular acts which the supplier carried out in sending the goods overseas.

118. Where a supplier does not enter an international contract of carriage in respect of the goods supplied, it is necessary to look at where, or to whom, the supplier delivers the goods. If the supplier delivers the goods to the operator of a ship or aircraft, we accept that the 'supplier exports'.

121. In the case of containerised cargo carried out of Australia by ship, we accept that the supplier exports the goods where the supplier is responsible for delivering the container into the custody of the operator of the ship at the port of shipment. This is usually achieved by physically transferring control of the goods to the stevedore who is accepting and loading goods for the shipping operator.

125. Where a supplier is only responsible for delivery of the goods at a place inside Australia and to a person in Australia who, or that, is not a ship or airline operator, the supplier is not considered to be the exporter. This is the case under an Ex-works (EXW) or Free Carrier (FCA) contract of sale where the supplier is only required to deliver the goods either at the supplier's own premises, or to a carrier, other than a ship or aircraft operator, named by the buyer. The named carrier may be an agent of the buyer, a freight forwarder, consolidator, or any other third party who, or that, is not a ship or airline operator contracted to carry the goods to an overseas destination. If the supplier is not the exporter, the supply is not GST-free under item 1 or 2 unless the requirements of subsection 38-185(3) are met…

From the facts provided, the supplier (packer) sells goods to you and you sell (in your own right) and export the goods to the overseas buyers. You will book the vessel and the FCL. The empty container will be sent to the supplier (packer), who will pack and deliver the FCL to the relevant terminal(s) in Australia nominated by you. The FCL is sent to the wharf after clearance with AQIS, who will issue a certain certificate to you. You are liable for the costs to AQIS. The export documentation such as the 'RFP to export prescribed goods' and the certificate named you as the exporter.

The facts indicate that you, and not the supplier, contract with, and are liable for the expenses to, the international carrier for the transportation of the goods outside Australia. The contract also indicates that the delivery is to a terminal/port as nominated by you, and that all costs/charges (including insurance) after DCT (that is, after delivery to the container terminal) are for the account of the buyer (being yourself). Other than delivering the FCL (of the goods) to the nominated terminal, there is no evidence available that the supplier was responsible for delivering the goods to the operator of a ship. The delivery of the goods at a place inside Australia and to an entity other than a ship or airline operator would not be sufficient. The exportation documentations indicate that you are the exporter. Accordingly, the supplier (packer) cannot be treated as the exporter and the primary condition that the 'supplier exports' the goods is not satisfied.

Note, in circumstances where the supplier has delivered the goods into the custody of the operator of a ship (as explained in GSTR 2002/6 above) and the supplier has documentary evidence of the particular acts, then it is accepted that the supplier exports the goods.

Subsection 38-185(3) of the GST Act

In addition to the above, subsection 38-185(3) of the GST Act expands the scope of Item 1 (and Item 2), and provides that a supplier who has not exported goods is treated as having exported them for the purposes of Item 1 (or Item 2) if the following conditions are met:

· before the goods are exported, the supplier supplies them to an entity that is not registered or required to be registered; and

· that entity exports the goods from Australia; and

· the goods have been rendered for export within the meaning of section 113 of the Customs Act 1901; and

· since their supply to that entity, the goods have not been altered or used in any way, except to the extent (if any) necessary to prepare them for export; and

· the supplier has sufficient documentary evidence to show that the goods were exported.

(Note that paragraph 38-185(3)(f) of the GST Act relates to the tourist refund scheme and is not applicable in this circumstance).

For subsection 38-185(3) of the GST Act to apply, all of the above requirements must be satisfied. The first requirement as provided in paragraph 38-185(3)(a) of the GST Act is that, before the goods are exported, the supplier supplies them to an entity that is not registered or required to be registered. As you are registered for GST this requirement is not satisfied and subsection

38-185(3) of the GST Act is not applicable. Accordingly, the primary condition that the 'supplier exports' the goods is not satisfied.

Summary

From the facts available, the supplier (packer) does not satisfy all the requirements of Item 1, and therefore the supply is not considered to be a GST-free export of goods. The sale of the goods is a taxable supply to you and the requirement of paragraph 11-5(b) of the GST Act is satisfied. Accordingly, in this circumstance you are entitled to claim an ITC on this acquisition of the goods.

We acknowledge that in some circumstances where the supplier has delivered the goods into the custody of the operator of a ship and the supplier has documentary evidence of the particular acts, the primary condition that the 'supplier exports' the goods is satisfied. In such circumstance, the supply of the goods to you is GST-free when it is exported before, or within 60 days (of the required time periods), and you are not entitled to claim an ITC on this acquisition.