Edited version of your written advice

Authorisation Number: 1013121236367

Date of advice: 9 November 2016

Ruling

Subject: GST and supply of goods that will be exported from Australia

Question

Will the sale of goods that will be exported within 60 days under Free Alongside Ship (FAS) Incoterms by you to an Australian business be a GST-free export supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Advice

Yes, the sale of goods that will be exported within 60 days under FAS Incoterms by you to an Australian business will be a GST-free supply under item 2 in the table in subsection 38-185(1) of the GST Act where you are the exporter of the goods and you hold documentary evidence that the goods have been exported.

Relevant facts

You are an exporting company located in Australia and you are registered for the goods and services tax (GST).

You intend to supply goods to an Australian company that is registered for GST.

You will sell goods to an Australian company under FAS Incoterms, load them in a sealed container with a shipping company, seal and directly send them to the wharf for loading onto a vessel for exporting purposes.

You will keep relevant customs documentation as proof of export.

You will receive payment for your sale in instalments. The goods will be exported within 60 days upon receipt of the final payment.

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

Note: Where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in section 195-1 of the GST Act.

Taxable supply

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

Under section 9-5 of the GST Act, a supplier makes a taxable supply if:

a) the supplier makes the supply for consideration;

b) the supply is made in the course or furtherance of an enterprise that the supplier carries on;

c) the supply is connected with Australia; and

d) the supplier is 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.

From the facts given, you will satisfy all the conditions in paragraphs 9-5(a) to (d) of the GST Act as:

(a) you will make the supply for consideration;

(b) you will make the supply in the course or furtherance of the business that you carry on;

(c) the supply will be connected with Australia as the goods are located in Australia and the supply involves the goods being removed from Australia and

(d) you are registered for GST.

Your supply of goods to the Australian company will be taxable to the extent that it will not be GST-free or input taxed.

From the facts given, your supply of goods does not satisfy the input taxed provisions under the GST Act.

GST-free supply

Relevant to your supply of goods that will be exported from Australia is item 2 in the table in subsection 38-185(1) of the GST Act (item 2)

Item 2 provides that a supply of goods for which consideration is provided in instalments under a contract that requires the goods to be exported is GST-free, but only if the supplier exports the goods from Australia before, or within 60 days (or such further 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 supplier gives the invoice.

Under Item 2 a supply of goods is GST-free where:

● the supplier exports them from Australia; and

● the export occurs within a specified time period (before or within a 60 day period or such further period as the Commissioner allows); and

● the supplier holds evidence that the goods have been exported.

We will now consider if the facts satisfy the above conditions.

Supplier is the entity that exports

Goods and Services Tax Ruling GSTR 2002/6 explains the requirements for a supply of goods to be a GST-free export under item 2.

In regard to when 'the supplier is the entity that exports the goods' for the purposes of item 2, paragraphs 22, 25 to 29 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 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; or

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

25. Similarly, a supplier exports goods where the goods are sent from Australia pursuant to a contract of sale on FAS or FCA terms, provided:

• the named place of delivery is an international port or airport; and

• the carrier to whom the goods are delivered, is the operator of a ship or aircraft.

26. This is because under these terms, and with the given provisos, the supplier is responsible for delivering the goods to the operator of a ship or aircraft who, or 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 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. 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.

28. 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.

29. A supplier who is not the exporter may still be treated as the exporter where the recipient exports and the requirements of subsection 38-185(3) are met. If so, the supply can still be GST-free (see paragraphs 67 to 81).

From the facts given, you will supply goods to an Australian company under FAS Incoterms, load them in a sealed container with a shipping company, seal and directly send them to the wharf for loading onto a vessel for exporting purposes.

Accordingly, where you will be responsible for the delivery of the goods to the ship's operator engaged to carry them out of Australia or if you engage a freight forwarder or consolidator to deliver the goods to the ship's operator on your behalf, you will be the exporter of the goods. The requirement for the 'supplier to be the entity that exports the goods' will be satisfied.

However, if you deliver the goods in Australia to a person who is not the operator of a ship or, another party acting on behalf of the Australian company delivers the goods to the ship's operator, you will not be the exporter of the goods. In this instance the requirement for the supplier to be the entity that exports the goods will not be satisfied. Your supply of goods will not be GST-free under item 2. Your supply will be a taxable supply under section 9-5 of the GST Act.

Subsection 38-185(3) of the GST Act will not apply to your supply of goods because one of the requirements in subsection 38-185(3) of the GST Act is the recipient is not registered for GST. The recipient of your supply is the Australian company and, since the Australian company is registered for GST the requirement for the recipient not to be registered for GST in subsection 38-185(3) of the GST Act will not be satisfied.

60-day period for export of goods

Under item 2 your supply of goods will be GST-free if you export the goods from Australia before, or within the 60 day period.

You advised the goods will be exported within 60 days of receipt of the final payment. In this instance the 60 day period requirement will be satisfied.

Evidence of export

You advised that you will keep relevant customs documentation as proof of export. In this instance this requirement will be satisfied.

Summary

Your supply of goods to the Australian company will be GST-free under item 2 where you are the exporter of the goods and the goods are exported within the 60 day period.