Edited version of your written advice

Authorisation Number: 1051187260143

Date of advice: 7 February 2017

Ruling

Subject: GST and the export of goods

Question 1

Is the supply of wine made by the Australian company to a goods and services tax (GST) registered company a GST-free supply under subsection 38-185(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) where the export of wine is done by the Australian company?

Advice

Yes. Based on the information provided, the supply of wine made by the Australian company to a GST registered company is a GST-free supply under either item 1 or 2 in the table in subsection 38-185(1) of the GST Act (whichever item is applicable) where the export of wine is done by the Australian company.

Question 2

Is the supply of wine made by the Australian company to a GST registered company a GST-free supply under subsection 38-185(1) of the GST Act where the export of wine is done by the GST registered company under an FOB sales contract?

Advice/

Yes. Based on the information received, the supply of wine made by the Australian company to a GST registered company is a GST-free supply under item 1 or 2 in the table in subsection 38-185(1) of the GST Act (whichever item is applicable) where the export of wine is done by the GST registered company under an FOB sales contract.

Relevant facts

You are an Australian company and registered for GST.

You sell wine to Australian based companies that are registered for GST and have been charging GST to the GST registered companies upon receipt of verbal advice a couple of years ago.

You either export the wine under your license on behalf of the GST registered companies or the GST registered companies export the purchased wine under their own license.

You provided the following information for the issues to be addressed in the private ruling:

Question 1:

The GST registered company (customer) contacts you, places an order and it requires you to export the wine.

● You do not have any written agreement/instruction with the customer to act as their agent for the export of the goods.

● The customer advises you which international carrier it wishes to use. You liaise with the carrier and make the arrangement on behalf of the customer. The carrier then obtains authorisation from the customer and bills the customer for their supply.

● You load the container and deliver it directly to the wharf.

● The Export Pre-Receival Advice document is proof that the container has been exported and you PRA the container delivered to the wharf under your name as evidence that you delivered the goods to the operator of the ship.

● You complete the EDN with your name as agent and customer's name as consignee.

● The goods are exported within 60 days from the date of the issue of the invoice to the customer.

Question 2

● The INCO terms for the sale contract with the GST registered customer is FOB.

● The customer arranges shipping and supplies details of the vessel booking to you.

● The customer completes the EDN and is listed as the 'exporter'. The customer supplies the EDN number to you.

● You load the container and deliver it directly to the wharf. You deliver the goods into the custody of the operator of the ship at the port of shipment, that is, you physically transfer control of the goods to the stevedore who is accepting and loading the good for the shipping operator.

● You PRA the container delivered to the wharf (this is proof of container exporting and you delivered the goods to the ship operator).

● You will request a copy of the Waybill from the customer once the goods are shipped.

● The goods are exported 60 days from the day of the issue of the invoice.

You can show proof that the goods have been exported from the following supporting documents:

● Vessel Booking details

● PRA

● Waybill (once ship has sailed)

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-185(1)

Reasons for decisions

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.

Questions 1 and 2

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 GST Act are satisfied.

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

Item 2 in the table in subsection 38-185(1) of the GST Act (item 2) states that a supply of goods for which the consideration is provided in instalments under a contract that requires the goods to be exported is GST-free, but only if the supplier exports them 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.

For a supply of goods to be GST-free under item 1 or 2, the supplier must export the goods before, or within a 60-day period (or such further period as the Commissioner allows). This item requires that there is an export of goods and the supplier is the entity that exports the goods.

Goods and Services Tax Ruling GSTR 2002/6 explains the requirements for supplies of goods to be GST-free exports.

Supplier is the entity that exports

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

i. the supplier contracts at their own expense with an international carrier for the transportation of the goods to a destination outside Australia; or

ii. the supplier is responsible for delivering the goods to the operator of a ship or aircraft that has been engaged by another party to transport those goods to a destination outside Australia; or

iii. the requirements of subsection 38-185(3) of the GST Act are satisfied.

Requirement (i)

The supplier exports where the supplier's name appears on the international transport document as 'shipper' and the supplier pays the transport operator. This is the case even if the supplier recoups the transport costs from the buyer.

From the facts given for questions 1 and 2, you do not contract at your own expense with an international carrier for the transportation of the supplied goods. You therefore are not the entity that exports the goods sold to the customer. In this instance the supply of goods does not satisfy the requirements in either item 1 or 2 under requirement (i) and therefore is not GST-free.

Requirement (ii)

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'.

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 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.

In the case of a contract of sale with FOB, the buyer must contract at the buyer's own expense for the carriage of the sale goods by ship from Australia to the overseas destination. Even though the contract of carriage may be between the buyer and the carrier, the supplier exports the goods for the purposes of items 1 and 2. This is because under an FOB sales contract the supplier is responsible for delivering the goods to the carrier by loading them on board the nominated ship that has been engaged to physically transport those goods to a destination outside Australia.

From the facts given for questions 1 and 2, you deliver the goods to the operator of the ship engaged by the customer and the PRA document is evidence that you have delivered the goods into the control of the ship operator. In this instance you, as the supplier of the goods, are the entity that has exported the goods.

Your supply of goods to the GST registered is GST-free under either item 1 or 2 (whichever is applicable) as you advised that the goods are exported within 60 days of the issue of an invoice to the customer.

Requirement (iii)

Since you are the exporter of the goods there is no need to consider requirement (iii).However for completeness of the ruling we will consider requirement (iii).

A supplier who is not the exporter may still be treated as the exporter where the recipient (buyer of the goods) exports and all the requirements in subsection 38-185(3) of the GST Act are met. In this case, the supply can still be GST-free where the goods are exported within the 60 day export time frame in item 1 or 2.

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. The requirements for subsection 38-185(3) of the GST Act are addressed at paragraphs 67 to 81 and paragraphs 237 to 290B in Goods and Services Tax Ruling GSTR 2002/6 (available at www.ato.gov.au).

One of the requirements in subsection 38-185(3) 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 for GST.

From the facts given for questions 1 and 2, the customer is registered for GST. Subsection 38-185(3) of the GST Act is not applicable to your supply in this case and where you are not the exporter of the goods your supply of goods to the GST registered customer is a taxable supply under section 9-5 of the GST Act.

Summary

Based on the information received, your supply of wine to the GST registered customer is a GST-free supply under item 1 or 2 in the table in subsection 38-185(1) of the GST Act (whichever item is applicable) where you deliver the goods to the operator of the ship engaged by the customer and the goods are exported within the 60 day period.