Edited version of your written advice

Authorisation Number: 1012676371050

Ruling

Subject: GST and export of goods

Question

Is the supply of the goods in the circumstances described GST-free?

Answer

Yes.

Relevant facts and circumstances

You sell goods, being Australian produced products.

A contract of sale is signed after product types, quantities and price are negotiated and commercial terms confirmed. The contact of sale specifies that the goods are for export and are sold on free-on-board (FOB) terms via a freight forwarder. A payment of X% of the total amount is payable on acceptance of the contract and the balance is payable prior to the shipping date.

The contact terms specify that you are responsible for organising the logistics of delivering the goods from your warehouse directly to the ship, the export certification and documentation, and for ensuring the goods arrive at the relevant overseas destination port. You take the following responsibilities:

• arrange for Customs clearance.

• organise transportation of goods from your warehouse to the Australian port

• track the goods to ensure arrival and acceptance at the destination port

• contact the sea freight forwarder directly regarding the shipment

On the day that the contract is signed, you receive the deposit and issue an invoice.

The goods are never released to the purchaser for the purchaser to export.

You export the goods from Australia within 60 days after the day you receive any of the consideration for the supply.

You hold different types of documents that a supplier needs to keep as evidence of satisfying the requirements for an export of goods to be GST free.

You provided the following documents evidencing the sale and export of the goods:

• Your invoice for the sale of goods to Entity X FOB terms. The invoice states that it is 'GST exempted'.

• Invoice issued to you by the Transport Company showing pick-up and delivery of goods from your warehouse to the Australian port.

• Interim receipt from the Logistics Company showing you as the consignor/shipper of the goods leaving the Australian port to an overseas port within 60 days of your invoice date.

• Invoice issued to you by the Logistics Company showing the Customer as the shipper of goods on board the 'Vessel' from the Australian port to the overseas destination with departure date within 60 days of your invoice date.

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 Subsection 38-185(1).

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-185(3).

A New Tax System (Goods and Services Tax) Act 1999 Section 195-1.

Reasons for decision

Summary

The supply of the goods in the circumstances described is GST-free.

Detailed reasoning

A supply of goods that are subsequently exported from Australia is GST-free if the requirements of one of the items in the table in subsection 38-185(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) are met.

Item 1 in the table in subsection 38-185(1) of the GST Act (Item 1) provides that a supply of goods is GST-free if the supplier exports them from Australia 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.

Goods and Services Tax Ruling GSTR 2002/6 explains the requirements for supplies

of goods to be GST-free exports.

Item 1 requires not only that there is an export of goods, but that the supplier is the entity that exports them.

Paragraph 22 of GSTR 2002/6 provides that the requirement in Item 1 that the supplier is the entity that exports the goods is satisfied where either:

(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.

A supplier exports goods where the goods are sent from Australia to another country pursuant to a contract of sale with terms such as FOB. This is because, under FOB terms, the supplier is responsible for delivering the goods on board a ship that has been engaged to carry them to an overseas destination.

However, a supplier does not export goods where the supplier's responsibility only extends to delivering the goods in Australia to a person who is not the operator of a ship or aircraft engaged to carry them out of Australia.

Paragraph 28 of GSTR 2002/6 advises that a supplier is considered responsible for delivery of the goods to the ship or aircraft operator even if the supplier arranges for another party, such as a freight forwarder or consolidator to deliver the goods to the carrier, on the supplier's behalf. However, where another party acting on behalf of the recipient delivers the goods to the ship or aircraft operator, the supplier is not the exporter.

On the information provided, the goods are sold on FOB terms. Pursuant to the contract of sale, you are responsible for organising the logistics of delivering the goods from your warehouse directly to the ship, arranging the export certification and documentation, and for ensuring the goods arrive at the relevant destination port. Hence, you are the exporter of the goods.

Item 1 also requires that the supplier exports the goods before, or within a 60 day period (or such further period as the Commissioner allows). The law requires the goods to be actually exported before or within the specified time period.

Given that goods can only leave Australia on board a ship or aircraft, paragraph 33 of GSTR 2002/6 provides that the time at which goods are exported from Australia is the time at which the ship or aircraft departs its final Australian port or airport and clears the territorial limits of Australia.

Paragraphs 34 and 35 of GSTR 2002/6 provide that the timing requirement is met if the ship or aircraft departs its final Australian port or airport and leave Australia before or within 60 days (or such further period as the Commissioner allows) after the earlier of:

(a) the day on which the supplier receives any of the consideration for the supply or

(b) the day the supplier gives an invoice for the supply.

You advised that you receive the deposit and issue an invoice on the day that the contract is signed. You further advised that you export the goods from Australia within 60 days after the day you receive any of the consideration for the supply. Hence, you satisfy the time requirement of Item 1.

Therefore, the supply of the goods in the circumstances described is GST-free.

Documentary evidence

To demonstrate that a supply is a GST-free export, you must have sufficient documentary evidence to show that all the requirements of Item 1 are met. You must obtain such documentary evidence during the process of exporting the goods, or within a reasonable period of time after the goods have been exported.

These documents will usually consist of:

• the transport documents evidencing the carriage of the goods out of Australia (for example a bill of lading or a sea waybill);

• the commercial documents in relation to the supply that identify you as the supplier, the recipient, the goods and the payment arrangements. The commercial documents should clearly link to the transport documents; and

• Customs and other official documents.

Documentary evidence is discussed in paragraphs 295 to 317 of GSTR 2002/6.

Additional information

Subsection 38-185(3) of the GST Act operates to treat the supplier in certain circumstances as having exported the goods when in fact the recipient exports the goods. Where the subsection applies the supply of goods may be GST-free under Item 1. The requirements of this provision are discussed in paragraphs 67 to 81 of GSTR 2002/6. Further explanation is provided in paragraphs 237 to 294.