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Edited version of your written advice
Authorisation Number: 1012832799069
Date of advice: 1 July 2015
Ruling
Subject: GST and supply of goods
Question
Was your supply of goods to the Australian company GST-free under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Advice
No. Based on the information received, your supply of goods to the Australian company was a taxable supply under section 9-5 of the GST Act.
Relevant fact
You are registered for the goods and services tax (GST).
An Australian GST registered company placed an order for goods with you, advising that the goods would be exported and it would be the shipper and would apply for the export permit and pay the FOB charges.
You agreed to sell the goods to the Australian company and a tax invoice was issued on receipt of the purchase order. You received payments for the supply of goods to the Australian company in instalments
The Freight Forwarder has given you a copy of the booking confirmation made by the Australian company for the export of the goods and the address to deliver the goods.
You delivered the goods to a warehouse that would pack the goods in containers on behalf of the Freight Forwarder. You did not pay any fees for delivering the goods.
You did not pay any FOB charges and have not received any documents from the Australian company or from the Freight Forwarder indicating that the goods left Australia.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-5 and
A New Tax System (Goods and Services Tax) Act 1999 section 38-185.
Reasons for decision
GST is payable on a taxable supply. Under section 9-5 of the GST Act 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 for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
You supplied the goods for consideration and the supply was made in the course of carrying on your enterprise. The supply was connected with the indirect tax zone as the goods were delivered in the indirect tax zone and you are registered for GST. The requirements in paragraphs 9-5(a) to 9-5(d) of the GST Act were satisfied when you sold the goods to the Australian company.
Your supply of goods to the Australian company would be a taxable supply unless it was GST-free or input taxed.
There is no provision in the GST Act under which your supply of goods would be input taxed. Thus, what is left to determine is whether the supply of goods was GST-free.
GST-free supply
A supply of goods, where those goods are exported from the indirect tax zone, is GST-free if the requirements of one of the items in the table in subsection 38-185(1) of the GST Act are met.
Since the consideration for your supply of goods was provided in instalments, item 2 in the table in subsection 38-185(1) of the GST Act (item 2) is of relevance in determining whether the supply of goods was GST-free.
Item 2 is set out below:
GST-free exports | ||
Item |
Topic |
These supplies are GST-free |
2 |
Export of goods - supplies paid for by instalments |
A supply of goods for which the *consideration is provided in instalments under a contract that requires the goods to be exported, but only if the supplier exports them from the indirect tax zone before, or within 60 days (or such other 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 suppliers gives the invoice. |
(* is a defined term in section 195-1 of the GST Act)
Goods and Services Tax Ruling GSTR 2002/6 (available for the legal database of www.ato.gov.au) explains the requirements for a supply of goods to be GST-free under item 2.
Under item 2, a supply of goods is GST-free where the supplier exports them from the indirect tax zone and the export occurs within a specified time period.
Item 2 requires not only that there is an export of goods, but that the supplier exports them.
Supplier exports the goods
Paragraphs 22, 24 and 27 in GSTR 2002/6 state:
22. The requirement 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 the indirect tax zone; 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 the indirect tax zone; or
(c) the requirements of subsection 38-185(3) of the GST Act are met.
24. A supplier also exports goods where the goods are sent to another country pursuant to a contract of sale with, for example, FOB terms. This is because under these terms, the supplier is responsible for delivering the goods on board a ship that has been engaged to carry them to an overseas destination.
27. However, a supplier does not export goods where the supplier's responsibility only extend to delivering the goods in the indirect tax zone to a person who is not the operator of a ship or aircraft engaged to carry them out of Australia. A supplier does not export under a contract of sale with FCA terms where the carrier to whom the goods are delivered, is not the operator of a ship or aircraft, for example, a freight consolidator.
Where a supplier does not either contract for the carriage of the goods from Australia (at the supplier's expense) or deliver the goods to the international transporter engaged by another, the supplier does not export the goods for the purposes of item 2.
Where a supplier is only responsible for delivery of the goods at a place inside the indirect tax zone and to an entity that is not a ship operator, the supplier is not considered to be the exporter.
From the information received, you delivered the goods to a warehouse in the indirect tax zone that was responsible to pack the goods in containers on behalf of the Freight Forwarder. In this instance, you did not export the goods as you delivered the goods to a place in the indirect tax zone and to an entity that is not a ship operator.
Your supply of goods to the Australian company was therefore not GST-free under item 2 as all of the requirements in item 2 were not satisfied.
Subsection 38-185(3) of the GST Act
Though you were not the exporter of the goods you might still be treated as the exporter where the Australian company satisfied the requirements in subsection 38-185(3) of the GST Act when it exported the goods. In this instance the supply of goods could still be GST free.
Under subsection 38-185(3) of the GST Act, a supplier who has not exported goods, is treated as having exported them for the purposes of item 2 if all conditions in that subsection are met.
The conditions for subsection 38-185(3) of the GST Act are listed at paragraph 67 of GSTR 2002/6 and include:
a) before the goods are exported, the supplier supplies them to an entity that is not registered or required to be registered for GST (paragraph 38-185(3)(a) of the GST Act).
The Australian company is registered for GST and therefore the requirement in paragraph 38-185(3)(a) of the GST Act was not satisfied when you supplied the goods to the Australian company.
As all the requirements in subsection 38-185(3) of the GST Act were not met, you could not be treated as the exporter of the goods. Your supply of goods was therefore not GST-free.
Summary
Your supply of goods to the Australian company was a taxable supply under section 9-5 of the GST Act as all the requirements in that section were satisfied.