Edited version of your written advice

Authorisation Number: 1051512516910

Date of advice: 3 May 2019

Ruling

Subject: Supply of logistics services

Question

Is the supply of logistics services by Entity A to Entity B GST-free?

Answer

Yes. The supply of logistics services, including the provision of storage facilities, by Entity A to Entity B is GST-free.

This ruling applies for the following period:

1 July 2018 to 30 June 2019

Relevant facts and circumstances

A supplier of goods engaged Entity B to transport the goods from outside Australia to an address in Australia. The contract for the supply of the goods requires that the goods are delivered to that address.

Entity B is based outside Australia. It does not have a presence in Australia.

Entity A entered into a contract with Entity B to provide the logistics services necessary for the delivery of the goods.

The goods are manufactured overseas and arrive by ship in Australia. Entity A unloads the goods and delivers them to a point of storage and unloads them. At a point to be determined, Entity A loads the goods from the storage and delivers them to the address specified in the contract for the supply of the goods.

Apart from transporting the goods, Entity A must source and provide storage facilities, whether at load ports, consolidation points or delivery ports appropriate to the sensitivity, value and nature of the goods to be stored. Entity A must provide the details of the storage providers proposed to be used by Entity A, for the Entity B’s vetting and approval. Entity A acquires the storage facilities in its own right and supplies them to Entity B.

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 38-190

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

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

Reasons for decision

GST is payable on a taxable supply.

Section 9-5 of the A New Tax System (Goods and Services tax) Act 1999 (GST Act) states:

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.

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

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

Entity A supplies its services to Entity B for a fee. Entity A makes the supply in the course of carrying on its enterprise. The supply is connected with the indirect tax zone as Entity A makes it through an enterprise that it carries on in the indirect tax zone. Entity A is registered for GST. All the requirements in paragraphs 9-5(a) to 9-5(d) of the GST Act are satisfied. Therefore, Entity A’s supply of services to Entity B is a taxable supply unless the supply is GST-free or input taxed.

There is no provision in the GST Act under which Entity A’s supply of its services to Entity B would be input taxed.

The logistics services supplied by Entity A consist mainly of transporting the goods from the port to the nominated place of delivery. However, the contract between Entity A and Entity B also requires Entity A to source and provide storage facilities for the goods.

Transport of the goods and associated services

Item 5 in the table in subsection 38-355(1) of the GST Act (Item 5) provides that the ‘international transport’ of goods is GST-free.

Item 5A in the table (Item 5A) provides that loading or handling of goods, the international transport of which is covered by Item 5, during the course of the international transport is GST-free.

The supply of other services, during the course of the international transport covered by item 5, to facilitate the international transport is also GST-free under Item 5A.

In relation to the import of goods, ‘international transport’ means the transport of the goods from a place outside the indirect tax zone to their ‘place of consignment’ in the indirect tax zone.

‘Place of consignment’ is defined in section 195-1 of the GST Act to mean:

● if the goods are posted to a place in the indirect tax zone – the place in the indirect tax zone to which the goods are addressed; or

● if the supplier of the goods is to deliver the goods to a place in the indirect tax zone – the place in the indirect tax zone to which the goods are to be delivered under the contract for the supply of goods; or

● if neither of the above applies; and the goods are to be transported into the indirect tax zone by an entity supplying a transport service to an entity that is to import the goods into the indirect tax zone – the place in the indirect tax zone to which the goods are to be delivered under the contract for the supply of the transport service; or

● in any other case – the port or airport of final destination as indicated on the transportation document.

The contract for the supply of the goods requires that the goods are delivered to an address in Australia. As such, the ‘place of consignment’ is that address. Therefore, the international transport of the goods begins from overseas where the goods are coming from and ends in the specified address which is the place of consignment.

The supply of services by Entity A in transporting the goods from the port to the specified address forms part of the international transport of the goods. While the services are done by Entity A in the indirect tax zone, the supply is made to Entity B who is a non-resident entity that has no presence in the indirect tax zone. Therefore, the supply is GST-free under Item 5.

The supply by Entity A of services associated with the international transport of the goods is also GST-free.

Supply of the storage facilities

Under subsection 38-190(1) of the GST Act certain supplies of things, other than goods or real property, for consumption outside the indirect tax zone are GST-free.

The supply of storage facilities is not a supply of goods. However, it needs to be determined whether it is a supply of real property.

Real property is defined in section 195-1 of the GST Act to include:

● any interest in or right over land; or

● a personal right to call for or be granted any interest in or right over land; or

● a licence to occupy land or any other contractual right exercisable over or in relation to land.

In determining whether a supply is properly characterised as a supply of real property or something else, it is necessary to consider all the circumstances of the transaction to ascertain its essential character.

Goods and Services Tax Ruling GSTR 2003/7 illustrates the importance of this characterisation issue. Paragraphs 105 and 106 of GSTR 2003/7 state:

Rental of particular secure storage space

105. If a licence to occupy a particular secure storage space is supplied along with security services but those services are ancillary to the licence to occupy land, the supply is of real property.

Provision of storage services, without rental of a particular site

106. Where the supply is of storage services only, there being no right to occupy particular storage space, the real property is merely the setting for the service performed. The supply is the service of storing goods. There is no supply of real property.

The contract between Entity A and Entity B requires Entity A to source and provide storage facilities for the goods. Entity A acquires the storage facilities in its own right and supplies them to Entity B.

Based on the terms of the contract between Entity A and Entity B, our view is that Entity A does not grant interest in or a right to occupy the storage facilities which it acquires in its own right. Rather, Entity A supplies the storage facilities merely as a setting for the performance of its logistics services. Therefore, the supply of the storage facilities is not a supply or real property.

Item 2 in the table in subsection 38-190(1) (Item 2) provides that a supply that is made to a non-resident who is not in the indirect tax zone when the thing supplied is done is GST-free if:

(a) the supply is neither a supply of work physically performed on goods situated in the indirect tax zone when the work is done nor a supply directly connected with real property situated in the indirect tax zone; or

(b) the non-resident acquires the thing in carrying on the non-resident’s enterprise, but is not registered or required to be registered for GST.

The supply of the storage facilities is not a supply of work physically performed on goods nor a supply directly connected with real property. The supply is made to Entity B who is not in Australia when the supply of the facilities is done. Therefore, the supply is GST-free under Item 2.