Edited version of private advice

Authorisation Number: 1051596578645

Date of advice: 23 October 2019

Ruling

Subject: GST and international freight rate

Question 1:

Is the supply of services for arranging transport of goods from a place outside Australia to the place of consignment in Australia made by Australian entity to the Australian customer GST-free as per section 38-355 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Question 2:

Should the all in international freight rate charged to the customer by Australian entity be included in the taxable importations as per section 13-20 of the GST Act?

Answer 1:

Yes, the supply of services for arranging transport of goods from a place outside Australia to the place of consignment in Australia made by Australian entity to the Australian customer is GST-free as per section 38-355 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Answer 2:

Yes, the all in international freight rate charged to the customer by Australian entity should be included in the taxable importations as per section 13-20 of the GST Act.

Relevant facts and circumstances

Australian entity is registered for GST in Australia. They provide international freight for vehicles, motorbikes, boats, trailers and caravans shipped from a place outside Australia to the place of consignment in Australia. Most of their clients are local Australian customers and that could be individuals or businesses.

They provide Asbestos Testing and Pre Cleaning Consolidation Shipping Services which includes the following:

·        Export clearance

·        Title clearance

·        30 Free days storage at origin depot

·        Freight Depot to Depot

·        Nata Approved Asbestos Testing

·        4 hours of cleaning

·        Approved Quarantine Inspection

·        Loading/ Unloading

·        Port charges both ends

·        Container drayage both ends

·        Insurance up to AUD $30,000

·        Photos for gate in survey

·        Gate out survey

·        Customs clearance

·        Dunnage disposal

·        3 free days storage at destination

The general Consolidation Shipping Schedule includes the following:

·        Export clearance

·        30 Free days storage at origin depot

·        60 Free days storage at origin depot for LCL

·        Fright Depot to Depot

·        Initial Quarantine Inspection

·        Loading/Unloading

·        Port charges both ends

·        Container drayage both ends

·        Insurance up to AUD $30,000 (excludes (LCL)

·        Photos for gate in survey

·        Gate out survey

·        Customs clearance

·        Dunnage disposal

·        3 free days storage at destination

The entity's overseas agent quotes mutual clients on all in rates for international transport which includes local Customs clearance charges (the local Customs clearance charges would normally include local port charges & Customs and quarantine clearance fees). They profit share with their overseas agent on the whole package not on each individual service.

The entity is providing international freight services to their local customers in Australia. They provide these services from a place outside Australia (the depot/warehouse overseas) to the place of consignment in Australia (mostly depot/warehouse in Australia).

They have no written agreement in relation to these international freight services that is provided to their customer. However, they provide a tax invoice, shipping services terms and conditions document and asbestos testing and pre cleaning consolidation shipping services document that acts as a contract/agreement.

As part of the supply, they pay the local port charges, Customs and quarantine clearance fees, and do not invoice the customer separately for these services; everything is included in the overall fee as part of their all in international freight charges for which they invoice the customer.

They also provide for the delivery and transport by road of the goods from the vessel to the warehouse. As stated previously, it is the requirement that the goods be transported to the place of consignment in Australia (depot/warehouse).

Some of the shipments are freight collect and some are freight pre-paid (meaning the freight is paid overseas).

They bill the local customer on all in rate for international freight which is GST-free from a place outside Australia to the place of consignment in Australia.

As their local customer is not paying GST on the invoice for the portion of local charges (which would normally be a service with GST applicable), they are including the full amount (all in rate) on the Customs declaration as overseas freight so that GST is charged then on the taxable importation.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 38-355(1)

A New Tax System (Goods and Services Tax) Act 1999 section 38-355(2)

A New Tax System (Goods and Services Tax) Act 1999 section 38-355(3)

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

Reasons for decision

GST-free international transport of goods:

The third column of this table sets out supplies that are GST-free:

(2) Paragraphs (a) and (b) of item 5, and item 5A, in the table in subsection (1) do not apply to a supply to the extent that the thing supplied is done in Australia, unless:

(a) the *recipient of the supply:

(i) is a *non-resident; and

(ii) is not in the indirect tax zone when the thing supplied is done in the indirect tax zone; or

(b) the supply is done by the supplier of the transport of the goods from or to the indirect tax zone (whichever is relevant).

(3) Items 5 and 5A, paragraph (b) to (d) of item 6, and paragraphs (b) and (c) of item 7, in the table in subsection (1) do not apply to a supply to the extent that:

(a) the supply is, or relates to, the *international transport of goods; and

(b) the supplier is a *redeliverer that is treated as the supplier of the goods under subsection 84-81(4); and

(c) the supply of the goods is a *taxable supply.

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

In relation to the importation of goods, item 5(b) in the table in subsection 38-355(1) of the GST Act ensures that the supply of the international transport from outside Australia to the port or airport of final destination in Australia continues to be GST-free. However the GST-free treatment may extend beyond this point if the place of consignment includes any further leg of Australian transport.

Hence, the term 'place of consignment' is important in as much as it defines the limits of the GST-free status afforded to international transport. The term is defined in section 195-1 of the GST Act.

The term 'place of consignment' of goods is defined in section 195-1 of the GST Act as follows:

(a)   if the goods are posted to Australia - the place in Australia to which the goods are addressed; or

(aa) if the supplier of the goods is to deliver the goods in Australia - the place in Australia to which the goods are to be delivered under the contract for the supply of the goods; or

(ab) if:

(i)               neither paragraph (a) nor (aa) applies; and

(ii)              the goods are to be transported into Australia by an entity supplying a transport service to an entity that is to import the goods into Australia;

the place in Australia to which the goods are to be delivered under the contract for the supply of the transport service; or

(a)   in any other case - the port or airport of final destination as indicated on the *transportation document.

The term 'transportation document' is also defined in section 195-1 of the GST Act as follows:

transportation document includes the following:

(b)   consignment note;

(c)   a house bill of lading;

(d)   an ocean bill of lading;

(e)   a house air waybill;

(f)     a master air waybill;

(g)   a sea waybill;

(h)   a straight line air waybill;

(i)     a sub-master air waybill;

(j)     other similar documents.

Item 5 and 5A of subsection 38-355(1) is not negated by subsections (2) and (3) because

·        The recipient of the supply is not a non-resident and is in Australia when the thing supplied is done

·        The supply does not related to the international transport of goods

·        The supplier is not the re-deliverer

·        The goods supplied are not taxable.

You arrange for the Customs clearance of the goods into Australia and advise that your involvement in the transportation of the goods ends when the goods are delivered to the warehouse in Australia (which is considered the place of consignment in Australia).

You are supplying international freight services to your customers in Australia and all your services (including port service charges, documentation charges, Customs and quarantine clearance fees) forms part of the overall supply of the international transport of goods from overseas to the place of consignment in Australia.

Accordingly, the all in international freight rate quoted and invoiced to the customer by your entity is GST-free.

Question 2

According to subsection 13-20(2) of the GST Act, the value of a *taxable importation (VOTI) is the sum of:

(a) the *customs value of the goods imported; and

(b) the amount paid or payable:

(i) for the *international transport of the goods to their *place of consignment in Australia; and

(ii) to insure the goods for that transport;

to the extent that the amount is not already included under paragraph (a); and

(ba) the amount paid or payable for a supply to which item 5A in the table in subsection 38-355(1) applies, to the extent that the amount:

(i) is not an amount, the payment of which (or the discharging of a liability to make a payment of which), because of Division 81 or regulations made under that Division, is not the provision of *consideration; and

Note: Division 81 excludes certain taxes, fees and charges from the provision of consideration.

(ii) is not already included under paragraph (a) or (b); and

(c) any *customs duty payable in respect of the importation of the goods; and

(d) any *wine tax payable in respect of the *local entry of the goods.

Value of taxable importation includes GST-free amount which should include the following:

·        The customs value of the goods

·        The amount paid or payable to

·        Transport and insure the goods to the place of consignment in Australia;

·        Load, handle and facilitate the transport of goods up to the place of consignment, provided the amount is not reflected in the cost of transport or customs value; and

·        Any customs duty and wine equalisation tax that may be payable

The domestic services (after the place of consignment) provided by you to the customer is treated as a taxable supply to the importer, these amounts do not need to be included in calculating the value of the taxable importation.

From the facts provided, the all in international freight rate that you charge to your customers includes the amount paid for the international transport of their goods from overseas to their place of consignment in Australia.

Therefore the value of taxable importation will include all in international rate that you charge your customer.