Edited version of private advice

Authorisation Number: 1051958753344

Date of advice: 14 March 2022

Ruling

Subject: GST and international freight transport

Question

Are you making a taxable supply of transport services to Z under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Your supplies of these transport services are GST-free. Therefore, GST is not payable unless Division 142 of the GST Act applies to treat the supplies as taxable.

If you refund to Z the amounts you have charged for GST, you can treat your supplies of the services in question as being non-taxable and you will be entitled to GST credits (decreasing GST adjustments) in respect of these supplies.

In order to claim the GST credits, you will need to add the amount of the GST refund you give to Z to label 1B of the Business Activity Statement for the tax period in which you gave a GST refund to Z (decreasing adjustments are reported as positive amounts at that label). You will need to issue an adjustment note to Z and retain a copy of that document in order to claim the decreasing adjustment.

See link to Goods and Services Tax Ruling GSTR 2013/2 in email for information on how to set out an adjustment note.

This ruling applies for the following period:

XX/XX/20XX to XX/XX/20XX

The scheme commences on:

XX Month 20XX

Relevant facts and circumstances

You are registered for GST.

You have been hired on a recurring basis by a non-resident, foreign transport company (Z), which does not have a presence in Australia, to transport heavy equipment (the goods) within Australia. You charge fees for these services.

V manufactures the goods in a foreign country. V sells the goods to W. W on-sells the goods to X. X on-sells the goods to its customers who use the goods in Australia.

Under its sale of goods agreement with W, V is responsible for delivering the goods from its factory in the foreign country to various places in Australia (being the final destinations), which are places beyond the port terminals at which the goods arrive in Australia. V hires Y to transport the goods from the factory of manufacture to various places in Australia (being the final destinations). Y sub-contracts out the delivery of the goods within Australia to Z, who in turn sub-sub-contracts you to undertake these domestic legs of the transport. W clears the goods through Australian customs and pays the import taxes.

You have provided the following transport documents to the ATO, which relate to the arrangements set out above:

Bills of lading

Packing Lists

Delivery Orders

The bills of lading show the place of collection of the goods in the foreign country and the Australian ports of discharge.

The packing lists evidence that the goods in question originate in the foreign country. The packing lists indicate that V is required to deliver the goods from the foreign country to various destinations in Australia (referred to in the packing lists as the 'final destinations')

The delivery orders evidence that you pick up the goods from various ports in Australia.

You generally deliver the goods to the 'final destinations' specified in the packing lists, with a number of exceptions so far as explained below.

The goods you delivered to location B were originally to have been delivered to X's premises at location A, which was specified as the 'final destination' on the associated packing list. These goods were delivered to location B instead due to xxxx issues with getting them to location A. You have an emailed instruction from Z in regards to this change of final destination. The email contains a spreadsheet called 'Updated Shipping Plan', which contains the following details:

• Port of exit: locality in a foreign country
• Final consignee customer delivery address: location B

The goods you delivered to location D were originally to have been delivered to X's premises at location C, which was specified as the 'final destination' on the associated packing list. You have an emailed instruction from Z in regards to this change of final destination. The email contains a spreadsheet called 'Updated Shipping Plan', which contains the following details:

• Port of exit: locality in a foreign country
• Final consignee customer delivery address: location D

You have charged GST to Z and reported GST to the Australian Taxation Office (Tax Office) in your Business Activity Statements in respect of the services in question, which you have provided so far.

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 Division 19

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 Division 142

Reasons for decision

Summary

Your supply of services to Z is GST-free because:

• these services form part of the international transport of goods from outside Australia to the places of consignment in Australia, and
• your customer is a non-resident who is not in Australia; and
• you are not a redeliverer of low value imported goods.

GST-free supplies are generally not subject to GST.

However, because of Division 142 of the GST Act, where you have charged GST to Z and reported GST to the ATO in your Business Activity Statements in respect of the services in question, these services will be treated under the GST Act as being taxable unless and until you have refunded to Z the amounts you have charged as GST. Once you have refunded the GST amounts charged to Z, you can treat the relevant supplies of services as non-taxable.

Detailed reasoning

GST is payable on taxable supplies.

Section 9-5 of the 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 that is defined in section 195-1 of the GST Act).

In your case, you have supplied a transport service for consideration and in the course or furtherance of an enterprise that you carry on; the supply of the service is connected with Australia and you are registered for GST. Therefore, you meet the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act.

There are no provisions of the GST Act under which your supply of the transport service is input taxed.

Therefore, what remains to be determined is whether your supply of the transport service is GST-free.

Paragraph (b) of Item 5 in the table in subsection 38-355(1) of the GST Act provides that, subject to subsections 38-355(2) and 38-355(3) 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 paragraphs (a) and (b) of item 5, and item 5A, in the table in subsection 38-355(1) of the GST Act do not apply 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 from or to Australia (whichever is

relevant).

Subsection 38-355(3) of the GST Act provides that items 5 and 5A, paragraphs (b) to (d) of item 6, and paragraphs (b) and (c) of item 7, in the table in subsection 38-355(1) of the GST Act, 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)

of the GST Act; and

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

In accordance with section 195-1 of the GST Act:

International transport means:

(a)         in relation to the export of goods - the transport of the goods from their place of export in

Australia to a destination outside Australia; or

(b)         in relation to the import goods - the transport of the goods from a place outside Australia to the

place of consignment in Australia.

Place of consignment of goods 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 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 the importer of 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.

The fact sheet, GST and international freight transport, states:

The international transport of goods (including the arranging of such services) is GST-free from a place outside Australia to the place of consignment in Australia for a supplier of that transport into Australia. 'Place of consignment' is defined in the GST law and is generally determined by the agreement between the entity responsible for delivering the goods to Australia and its contractual counterparty (overarching agreement). The overarching agreement would be:

•         The sale of goods agreement if the seller is responsible for delivering the goods to Australia;

•         The buyer's agreement with a transport supplier (or forwarder) if the buyer is responsible for transporting (or arranging for the transport) of the goods from the country of export to Australia; or

•         In circumstances where there is no overarching agreement (for example, self-transport), the port or airport of final destination.

The fact sheet states under the heading 'Subcontractors and forwarders who do not bring the goods to Australia':

Subcontractors and forwarders who provide (or arrange) domestic transport and associated services to a non-resident who is not in Australia when the services are provided, make a GST-free supply where those services form part of the international transport of goods.

The goods in your case are brought to Australia.

Your service of delivering the goods within Australia relates to the international transport of the goods from overseas to Australia and you have documentary evidence of this.

We shall now consider whether you supply your delivery services up to the places of consignment as defined in the GST Act.

The goods in your case are not sent by postal mail, so paragraph (a) of the definition of place of consignment is not relevant to your case. Therefore, we need to next consider paragraph (aa).

V sells the goods to W. V is required to deliver the goods to places in Australia (the final destinations). V contracts Y to deliver the goods from overseas to the final destinations in Australia as set out in:

• the packing lists; or
• in the updated shipping plan spreadsheet you received from Z (in the case of goods that were delivered to location B and location D)

These final destinations are the places of consignment of the goods in accordance with paragraph (aa) of the definition of places of consignment in section 195-1 of the GST Act.

The Explanatory Memorandum to the Tax Laws Amendment (2010 GST Administration Measures No.3) Bill 2010 provides at paragraph 1.20:

1.20 The place where an Australian transport supplier delivers goods in Australia is the place of consignment for inbound goods from overseas if they can show that this is the final place in Australia to which the goods are required to be transported under the contract or arrangement for the international transport of the goods.

In accordance with the fact sheet, GST and international freight transport, a local transport supplier may not have access to the relevant overarching agreement relating to the international transport of goods from overseas to Australia. The fact sheet provides that the local transport supplier in these cases can treat the place to which they deliver the goods in Australia as being the place of consignment for the purposes of section 38-355 of the GST Act if their business systems gather alternative evidence that the places to which the local transport supplier delivers the goods are the places of consignment for the purposes of that section.

We are satisfied that the documentary evidence you provided to the Tax Office is sufficient to treat the places of consignment of the overseas originating goods in question as being the places to which you deliver the goods within Australia, being the places to which V has agreed with its customer to deliver these goods. The places to which you deliver these overseas originating goods in Australia are the places to which these goods are required to be transported under the contract for the international transport of the goods (the contract between V and Y).

Therefore, you can treat your transport service as forming part of the international transport of goods from overseas to the places of consignment in Australia for the purposes of section 38-355 of the GST Act.

The transport services you do are performed wholly within Australia. Although you do not bring the goods to Australia, your customer (Z) is a non-resident company without a presence in Australia.

You are not a redeliverer. Therefore, the exclusion at subsection 38-355(3) of the GST Act does not apply.

Hence, you make a GST-free supply of an international freight transport service under section 38-355 of the GST Act under the circumstances. GST is generally not payable on GST-free supplies.

However, because of Division 142 of the GST Act, where you have charged GST to Z and reported GST to the Tax Office in your Business Activity Statements in respect of the services in question, these services will be treated under the GST Act as being taxable unless and until you have refunded to Z the amounts you have charged as GST. Once you have refunded the GST amounts charged to Z, you can treat the relevant supplies of services as non-taxable.

Additional information

It is highly likely that your supply of the services in question is also GST-free under item 2 in the table in subsection 38-190(1) of the GST Act. However, we do not have sufficient information to determine this for certain. The missing information is:

• the GST-registration status of the entities who received the goods at the final destinations
• whether those entities are carrying on a business in Australia
• whether those entities acquired the goods solely for private or domestic purposes

In any case, your supplies of the services in question are GST-free under section 38-355 of the GST Act.