Edited version of private advice

Authorisation Number: 1012641338301

Ruling

Subject: GST and supply of logistic and customs clearance services

Question

Is the supply of logistics and customs clearance services made by the Australian company to the non-resident company GST-free under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Advice

Yes, the supply of logistics and customs clearance services made by the Australian company to the non-resident company is GST-free under items 5 and 5A in the table in subsection 38-355(1) of the GST Act.

Relevant fact

You are an Australian company and registered for the goods and services tax (GST).

You have an arrangement with a non-resident company located outside Australia to carry out all services needed to deliver their products to their customers in Australia. You invoice the non-resident company for the services. You do not have any contact with the offices that the non-resident company has in Australia. You only liaise with the non-resident company and the provision of your services is not for the purposes of the Australian offices.

You provide the non-resident company with customs clearance and logistics services to their client's door and this involves - vessel monitoring, payment of local charges to the shipping line, customs clearance, collection of containers from the wharf, unpacking the containers, delivery of the container contents to the Australian customer. The services are provided as required from time to time.

Your services do not include arranging for the shipping of the goods from overseas when delivering the goods to the premise of the Australian customer in Australia. The non-resident company arranges their own shipping for the international part.

The Australian customer is the importer of the goods into Australia and is responsible to pay the GST on the importation. You have written authority from the Australian customer to act as their agent for the customs clearance and have given us a copy of the authority.

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 195-1

A New Tax System Goods and Services Tax Act 1999 subsection 38-355(1)

A New Tax System Goods and Services Tax Act 1999 subsection 38-355(2)

Reasons for decision

GST is payable on a taxable supply. You make a taxable supply under section 9-5 of the GST Act 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 for GST.

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

All of the above requirements must be satisfied for a supply to be a taxable supply under section 9-5 of the GST Act.

From the facts given, you satisfy paragraphs 9-5(a) to 9-5(d) of the GST Act when you supply the logistics and customs clearance services as:

a) you make the supply for consideration;

b) the supply is made in the course of a business that you carry on;

c) the supply is connected with Australia as the supply is done in Australia and through a business that you carry on in Australia; and

d) you are registered for GST.

However, your supply is not a taxable supply to the extent it is GST-free or input taxed. There is no provision under the GST Act that makes your supply of logistics and customs clearance services input taxed.

GST-free

Relevant to your supply of logistics and customs clearance services is Items 5 and 5(A) in the table in subsection 38-355 of the GST Act (Items 5 and 5A).

Items 5 and 5A appears as follows:

(*denotes a term defined in section 195-1 of the GST Act)

Supply of logistic services

'International transport' under section 195-1 of the GST Act means:

(b) in relation to the import of goods - the transport of the goods from a place outside Australia to their place of consignment in Australia.

'Place of consignment' of goods under section 195-1 of the GST Act 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.

Further support for determining the place of consignment for the goods can be drawn from the Explanatory Memorandum to the Tax Laws Amendment (2010 GST Administration Measures No. 3) Bill 2010 (the EM). At paragraph 1.19 the EM states:

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. …

The terms of trade 'delivered duty unpaid' (DDU) is no longer used but is similar to DAP terms of trade.

Based on the information received, we consider the non-resident company's supply of goods to their Australian customer is effectively on 'delivered at place' (DAP) terms and paragraph (aa) of the definition of 'place of consignment' in section 195-1 of the GST Act is the relevant provision in determining the place of consignment of the goods in relation to your supply. This is because even though the Australian customer is responsible for any taxes and/or duties on the importation of the goods in Australia, the non-resident company is responsible for the delivery of the goods to the premises of the Australian customer in Australia and this is evidenced by their acquisition of transport services from an overseas carrier and you in fulfilling that responsibility.

Accordingly, you supply transport within Australia that forms part of the international transport of the goods from a place outside of Australia to the customer's nominated address in Australia under paragraph (b) in item 5.

We will now consider subsection 38-355(2) of the GST Act to determine whether your supply of logistic services is GST-free under paragraph (b) in item 5.

Subsection 38-355(2) of the GST Act

Subsection 38-355(2) of the GST Act states:

2. Paragraphs (a) and (b) of item 5, and item 5A, in the table in subsection (1) do not apply to a supply to the extent that the thing supplied is done in Australia, unless:

a) the* recipient of the supply:

i. is a *non-resident; and

ii. is not in Australia when the thing supplied is done in Australia; or

b) the supply is done by the supplier of the transport of the goods from or to Australia (whichever is relevant).

(* denotes a defined term in section 195-1 of the GST Act)

Pursuant to paragraph 38-355(2)(a) of the GST Act, the transport of goods within Australia that forms part of the international transport of those goods by another entity to Australia is GST-free where the supply is made to a non-resident and the non-resident is not in Australia when the thing supplied is done in Australia.

Subparagraph 38-355(2)(a)(ii) of the GST Act requires that the non-resident is not in Australia when the thing supplied is done.

Goods and Services Tax Ruling GSTR 2004/7 (GSTR 2004/7) examines when a supply is made to a non-resident that is 'not in Australia when the thing supplied is done' for the purposes of items 2 and 3 in the table in subsection 38-190(1) of the GST Act. We consider that the view expressed in that ruling applies equally when considering the term 'not in Australia when the thing supplied is done' in subparagraph 38-355(2)(a)(ii) of the GST Act.

Paragraphs 37 to 41 of GSTR 2004/7 explain when a non-resident company is in Australia in relation to the supply. These paragraphs state:

37. A non-resident company is in Australia if that company carries on business (or in the case of a company that does not carry on business, carries on its activities) in Australia:

(a) at or through a fixed and definite place of its own for a sufficiently substantial period of time; or

(b) through an agent at a fixed and definite place for a sufficiently substantial period of time.

38. We consider that it would be reasonable for a supplier to conclude that a non-resident company is in Australia if:

• the company is registered with ASIC; or

• the company has a permanent establishment in Australia for income tax purposes.

39. However, a non-resident company to which the supplier makes a supply may be able to demonstrate to the supplier that, even though it is registered with ASIC or has a permanent establishment, on application of the test (at paragraph 37) to its particular circumstances, the non-resident company is not in Australia.

40. Suppliers should be aware that even if a company is not registered with ASIC, it may still be in Australia on an application of the test (at paragraph 37). Similarly, even if a company does not have a permanent establishment in Australia for income tax purposes, it may still be in Australia on application of the test to its particular circumstances.

41. A non-resident company is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence, for example, its Australian branch. If the supply is not for the purposes of the Australian presence but that Australian presence is involved in the supply, the company is in Australia in relation to the supply, except where the only involvement is minor.

Based on the information received the non-resident company is incorporated outside Australia and therefore a non-resident for GST purposes. The non-resident company has offices in Australia and you have no contact with these offices. Further, the services you supply are not for the purposes of the Australian offices. In this instance the non-resident company is a non-resident that is not in Australia when you provide your logistics services.

Accordingly, the supply you made to the non-resident company meets the requirements of paragraph 38-355(2)(a) of the GST Act. The logistics services you supplied to the non-resident company are therefore GST-free under paragraph (b) in item 5.

Notwithstanding that your supply to the non-resident company is GST-free, you will need to be satisfied that their services form part of the international transport of goods to the place of consignment of the goods (as defined). Accordingly, you may need confirmation from the non-resident company that the sale of goods contract with the Australian customer includes delivery to the place where you are required to deliver the goods for the non-resident company.

Supply of customs clearance

The fact sheet 'GST and international freight transport' provides guidance on 'loading, handling and other services' for the purposes of item 5A and states the following:

Services that facilitate the international transport include services that are carried out in order for goods to be delivered to their place of consignment or a destination outside of Australia and therefore will be GST-free.

If goods come into Australia under trading terms where the seller has the responsibility of bringing the goods to the port of destination (typically CIF terms), then the place of consignment is the port. In these circumstances, fumigation services and services associated with clearing the goods for home consumption do not facilitated international transport. If the seller has responsibility for certain loading and handling services at the port, then those loading and handling services facilitate the international transport.