Edited version of private advice

Authorisation Number: 1051760621544

Date of advice: 30 September 2020

Ruling

Subject: GST and international transport services

Questions

1.    Is GST payable on the supply of freight handling and delivery services of packages landed in Australia that you provide to non-resident entity for distribution to end customers?

2.    Is GST payable on the freight handling services on shipments landed in Australia, requiring delivery to your facilities for unpacking/unbundling?

3.    Is GST payable on logistics and freight services to deliver goods from your facilities to end consumers (known at the time of import)?

4.    Is GST payable on packing, logistics and freight services to deliver goods held in consignment at your facilities to end consumers (not known at the time of original import)?

Answers

1.    No

2.    No

3.    No

4.    No

The scheme commences on 1 July 2016

Relevant facts and circumstances

·         You are an Australian entity that is registered for GST in Australia

·         You are an Australian Freight Forwarding company

·         The non-resident entity is wholly owned subsidiary of a multinational group based in US and UK

·         The non-resident entity acts as an inbound and outbound gateway. The e-commerce parcels originate from outside of Australia for delivery to the final customer's nominated address

·         The non-resident entity engages you to provide transport services in relation to its customers that are based outside of Australia

·         The non-resident entity is not registered for GST in Australia and it does not have a presence in Australia, nor does it employ any staff in Australia.

·         You have been engaged by non-resident entity to provide freight handling, logistics and final stage delivery services of the e-commerce parcels in Australia.

These services include:

o   providing freight handling and delivery services of packages landed in Australia for distribution to end customers;

o   providing unpacking/unbundling services on shipments landed in Australia and delivered to your facilities;

o   providing logistics and freight services to deliver goods to end consumers (known at the time of import); and

o   providing packing, logistics and freight services to deliver goods held on consignment to end consumers (not known at the time of original import).

·         You have sent us an invoice issued to non-resident entity by you for services performed providing a list of all deliveries performed in the week. The list shows the following key descriptions of each parcel:

o   Date - date of delivery

o   Con-Note - parcel tracking reference

o   Reference - e-commerce client's order reference

o   Receiver - the end customer

o   From - the port in Australia that the parcel enters into Australia from and where the delivery commences from in Australia

o   To - the region to which the parcel gets delivered

o   Zone - the geographic zone that depicts the distance from the starting point in Australia. This is used to determine the rate to be charged for the delivery.

·         You have a Master Operational Services has the following conditions:

The Services include:

o   Call Centre Services - are provided on stand- alone basis

o   Delivery Services - include transport; delivery and handling services

o   Fulfillment Services - include transport; warehousing and delivery services

o   Trade Services - include customs clearance (import, export, transit); refund and return solutions; product classification (HS-code allocation) and classification rulings; VAT representation services; trade consulting services and permits and licencing application services

The Total Service Fees is equal to:

o   Service Provider's Actual Cost of Operations, plus a mark-up; and

o   Other expenses that are recharged at cost (other expenses)

The Actual Cost of Operation includes, but is not limited to:

o direct costs (e.g. transport and handling costs);

o other operating expenses; and

o support, general and administrative expenses and other overhead costs

·         You have also supplied us a shipment detail which gives us the following information:

o   The client's name

o   Account number

o   Ship method

o   Carrier

o   Customer Reference

o   Processed Date

o   Place of origin

o   Receiver address

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

Reasons for decision

Questions 1, 2, 3 and 4

These reasons for decision accompany the Notice of private ruling

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

GST is payable on taxable supplies.

You make a taxable supply where you meet the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which 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 in section 195-1 of the GST Act)

The indirect tax zone is Australia.

In your case, you meet the requirements of paragraph 9-5(a) to 9-5(d) of the GST Act. That is:

·         you are providing freight, delivery and packaging services for consideration (paragraph 9-5(a) of the GST Act)

·         you are providing the above services in the course or furtherance of an enterprise that you carry on (paragraph 9-5(b) of the GST Act)

·         the supply is connected with Australia as you supply the transport services through an enterprise that you carry on in Australia (paragraph 9-5(c) of the GST Act); and

·         you are registered for GST (paragraph 9-5(d) of the GST Act).

There are no provisions of the GST Act under which your supply of freight, delivery, logistics and packaging services would be input taxed. Therefore, what remains to be determined is whether your supply of the freight, delivery, logistics and packaging service is GST-free.

The supply of the freight, delivery, logistics and packaging services in question will be GST-free if it meets the requirements of item 5 in the table in subsection 38-355(1) of the GST Act or item 2 in the table in subsection 38-190(1) of the GST Act.

GST-free international transport of goods

Paragraph (b) of item 5 in the table in subsection 38-355(1) of the GST Act provides that, subject to subsection 38-355(2) of the GST Act, the international transport of goods from a place outside Australia to their place of consignment in Australia is GST-free.

Subsection 38-355(2) of the GST Act provides that paragraph (b) of item 5 does 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 Australia when the thing supplied is done in Australia; or

(b)  the supply is done by the supplier of the transport of the goods to Australia.

Paragraph (b) of section 195-1 of the GST Act provides that 'international transport' means, in relation to the import of goods, the transport of the goods from a place outside Australia to their place of consignment in Australia.

Section 195-1 of the GST Act provides that the 'place of consignment' means:

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

(aa) if the supplier of the goods is to deliver the goods to a place in Australia -

the place in Australia to which the goods are 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

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

We do not consider that you are making a supply of freight, logistics and transport service from a place outside of Australia to a place of consignment in Australia.

The non-resident entity has a contract with you to supply freight, logistics and transport services from the place when the goods are landed in Australia therefore subsection 38-355 of the GST Act does not apply.

Is the supply covered by item 2 in the table in subsection 38-190(1) of the GST Act?

Item 2 in the table in subsection 38-190(1) of the GST Act provides that a supply of a thing (other than goods or real property) made to a non-resident is GST-free if it is a supply that is made to a non-resident, who is not in the indirect tax zone when the thing supplied is done, and:

(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

The supply of services by you may be considered GST-free under item 2 of the table in subsection 38-190(1) of the GST Act if the recipient (of the transport supply made by you, not the recipient of the transport of goods from overseas into Australia) is a non-resident. This is confirmed in GSTR 2003/7:

Example 1 - supply of transport services

60. An Australian based transport company supplies transport services within Australia to a non-resident shipping company. The non-resident shipping company is not in Australia when the services are performed and the services are not provided to another entity in Australia. Is the supply of transport services a supply of work physically performed on goods situated in Australia?

61. No. The supply of transport services is not a supply of work physically performed on goods. Although the goods are moved from one location to another, the supply does not have any physical effect on the goods themselves.

62. The supply is GST-free under paragraph (a) of item 2. Paragraph (a) of item 2 is satisfied because the supply does not fall within either of the exceptions in that paragraph. Subsection 38-190(3) does not apply because the services are not provided to another entity in Australia.

It is confirmed from the information received from the tax agent that the non-resident entity does not have a presence in Australia. It does not have any employees in Australia and is not registered for GST in Australia.

The non-resident is the recipient of the services supplied by you and is also not in Australia when the freight, delivery, logistics and packaging services are provided by you. Therefore, the services are considered GST-free under item 2 of the table in subsection 38-190(1) of the GST Act.