Edited version of private advice

Authorisation Number: 1052077153687

Date of advice: 12 January 2023

Ruling

Subject: GST and exported goods

Question

Are you making a GST-free supply under section 38-185 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) when you supply leadfree solder to the Non-resident recipient?

Answer

Yes, even though you have not exported the goods, your supply is GST-free under subsection 38-185(3) of the A New Tax System (Goods and Services Tax) Act 1999.

This ruling applies for the following periods:

All tax periods ending on or after 31 January 20XX

Relevant facts and circumstances

You are registered for GST and carry on a manufacturing enterprise in Australia

You supply goods to a non-resident recipient

You packaged the goods, suitable for export, and made the goods available to be picked up from your premises in Australia

The non-resident recipient arranged for a shipping agent to pick up the goods from your premises and deliver them to their premises in New Zealand

The non-resident recipient has provided you with documentation confirming that the goods were exported from Australia on the day after you made them available for collection

The non-resident recipient is not registered for GST.

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 subsection 38-185(1).

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-185(3).

Reasons for decision

A supply of goods that are 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 met.

Item 1 in the table in that subsection (Item 1) provides that a supply of goods is GST-free if the supplier exports them 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.

The Goods and Services Tax Ruling, Goods and Services Tax: Exports of goods, items 1 to 4 of the table in subsection 38-185(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GSTR 2002/6) explains the requirements for supplies of goods to be GST-free exports.

For the supply of goods to be GST-free under item 1, the supplier must export the goods before, or within a 60 day period (or such further period as the Commissioner allows). The law requires the goods to be actually exported before or within the time period.

Given that goods can only leave Australia on board a ship or aircraft, paragraph 33 of GSTR 2002/6 provides that the time at which goods are exported from Australia is the time at which the ship or aircraft departs its final Australian port or airport and clears the territorial limits of Australia.

Paragraphs 34 and 35 of GSTR 2002/6 provide that the timing requirement is met if the ship or aircraft departs its final Australian port or airport and leaves Australia before or within 60 days.

Paragraphs 125 and 130 of GSTR 2002/6 explain who is considered to be the exporter where the supplier is only responsible for delivery of the goods at a place inside Australia (including the supplier's premises). Paragraph 130 states:

130. Where a supplier does not either contract for the carriage of the goods from Australia (at the supplier's own expense) or deliver the goods to the international transporter engaged by another, the supplier does not export the goods for the purposes of items 1 or 2. Usually, this would mean the recipient exports the goods. If the recipient exports the goods, the supply to the recipient may still be GST-free where the requirements of subsection 38-185(3) are met (refer to paragraphs 237 to 294).

In the supply of goods described above, you have not exported the goods - you, the supplier, packaged the goods, suitable for export, and made the goods available to be picked up from your premises in Australia.

The recipient arranged for a shipping agent to pick up the goods from your premises and deliver them to Brisbane Airport for export to New Zealand. The recipient is the exporter.

If the recipient exports the goods, the supply to the recipient may still be GST-free where the requirements of subsection 38-185(3) of the GST Act are met.

Subsection 38-185(3) of the GST Act treats the supplier as having exported the goods (even though the recipient in fact, exported the goods) where the specified requirements are met. In addition to satisfying all the elements in subsection 38-185(3), a supplier must also satisfy the other requirements of item 1.

Relevantly, the following requirements must all be met for subsection 38-185(3) of the GST Act to apply:

(a)  before the goods are exported, the supplier supplies them to an entity that is not registered or required to be registered for GST; and

(b)  that recipient exports the goods from Australia; and

(c)  the goods have been entered for export within the meaning of section 113 of the Customs Act 1901 (this is met where an export entry document has been communicated to Customs - see paragraph 73 of GSTR 2002/6); and

(d)  since their supply to the recipient, the goods have not been altered or used in any way, except to the extent (if any) necessary to prepare them for export; and

(e)  the supplier holds sufficient documentary evidence to show that the goods were exported.

However, if the goods are re-imported into Australia, the supply is not GST-free unless the re-importation is a taxable importation.

Paragraph 72 of GSTR 2002/6 provides that the phrase 'that entity that exports the goods' in subsection 38-185(3) of the GST Act, means that the recipient must export the goods. This requirement is met where:

(a)  the recipient contracts at the recipient's own expense with an international carrier for the transportation of the goods to a destination outside Australia, or

(b)  the recipient is responsible for delivering the goods to the operator of a ship or aircraft who, or that, has been engaged by another party to transport those goods to a destination outside Australia.

The goods were placed at the recipient's disposal at your premises and the recipient authorised a third party to arrange the transport of the goods from Australia by air. The agent picked up the goods and delivered them to Brisbane Airport for export to New Zealand.

Under paragraph 38-185(3)(a) of the GST Act, it is a requirement that the recipient of the supply is not registered, and that the recipient is not required to be registered for GST in Australia.

A supplier is able to ensure that a recipient is not registered by checking the Australian Business Register. The supplier must be satisfied, on reasonable grounds, that the entity it supplies to is not required to be registered. Where a supplier is not in a position to be aware of these circumstances, enquiries should be made of the recipient.

In this instance, it is reasonable to assume that the recipient is not required to be registered for GST and, as such the requirements of paragraph 38-185(3)(a) of the GST Act are satisfied.

The requirements of paragraph 38-185(3)(b) of the GST Act are also satisfied as the recipient arranged a third party to export the goods on its behalf.

For the purpose of satisfying the requirements of paragraph 38-185(3)(c) of the GST Act, you need to be able to substantiate that the goods were entered for export. The documentation you have been provided from the recipient showing that the goods were exported demonstrates that those goods have been entered for export.

The requirements of paragraph 38-185(3)(d) of the GST Act may be met as the Australian supplier may be satisfied on reasonable grounds that the goods supplied have not been used since their supply for a purpose other than is necessary to prepare them for export. As the goods were collected from your premises by the transport agent and delivered directly to the recipient's premises in New Zealand, the goods could not have been used or altered prior to their export.

Paragraph 38-185(3)(e) of the GST Act requires that the supplier holds sufficient documentary evidence to show that the goods were exported. This evidence does not usually come into existence at least until the goods are in the process of being exported. Evidence that simply demonstrated that it is intended that the goods be exported is not sufficient.

Paragraph 280 of GSTR 2002/6 provides that where the recipient is the exporting entity, the supplier will only know that the goods have been exported if the recipient provides the supplier with evidence of export. The GST law specifically requires the supplier to obtain and hold such evidence. As explained in paragraph 281 of GSTR 2002/6, if a supplier does not obtain and hold sufficient evidence to show that the goods have been exported, the supplier cannot be treated as having exported them for the purposes and the supply of those goods is not GST-free.

If the supplier obtains sufficient documentary evidence of the export within the 60 day period, or if obtained after the end of this period, before the due date for lodgement of the next Activity Statement, the requirement to have documentary evidence that the goods were exported is satisfied.

The requirements of subsection 38-185(3) of the GST Act, in particular the requirement for the supplier to hold the export documentation, are likely to impact on the commercial arrangements between the supplier and the recipient. For example, the sale transaction may be treated as GST-free because the recipient has agreed to supply the required documentation within a specified period of time. On the other hand, a sale transaction that was initially treated as taxable, may become GST-free where the recipient subsequently provides the required export documentation. In that case, an adjustment event occurs.

If you, as supplier do not hold the export documentation and there is no arrangement in place for that documentation to be provided by the recipient, the supply of goods is not GST-free even though the goods may be exported.

As you hold the transport documentation showing that the goods were exported from Australia and imported into New Zealand, the requirements of paragraph 38-185(3)(e) of the GST Act have been satisfied.

Paragraph 38-185(3)(f) of the GST Act relates to goods exported as accompanied luggage and wine and, in this instance, is not applicable.

As all the requirements of subsection 38-185(3) of the GST Act are satisfied, you are treated as the exporter even though the export was undertaken by the recipient. As the export occurred on the day after you issued an invoice to the recipient, the supply of the goods is GST-free under item 1 of the table in subsection 38-185(1) of the GST Act.