Edited version of private advice

Authorisation Number: 1052129492173

Date of advice: 14 June 2023

Ruling

Subject: GST and supply

Question 1

Should the invoice(s) to entity B (a non-resident) for entity A's supply of international freight forwarding services, including customs clearance services and the arrangement of international transport include GST?

Answer

No. Entity A's supply of international freight forwarding services, including customs clearance services and the arrangement of international transport from a place outside Australia to their warehouse is GST-free under subsection 38-355(1) of the GST Act. Accordingly, invoice(s) to entity B for these services should not include GST.

Question 2

Should the invoice(s) to entity B for Entity A's supply of domestic warehousing/storage include GST?

Answer

No. Entity A's supply of domestic warehousing/storage is GST-free under subsection 39-190(1) of the GST Act. Accordingly, invoice(s) to entity B for this service should not include GST.

Question 3

Should the invoice(s) to entity B for entity A's supply of domestic delivery services from entity A's warehouse to various parts of Australia include GST?

Answer

Entity A's supply of domestic delivery services is GST-free under Item 2(a) in the table in subsection 39-190(1) of the GST Act provided the recipient of the supply is an Australian-based business entity.

If this supply is provided to an entity other than an Australian-based business entity, then the GST-free status of the supply under Item 2(a) in the table in subsection 39-190(1) of the GST is negated by subsection 38-190(3) of the GST Act and the invoice(s) to entity B for this service should include GST.

This ruling applies for the following period:

Not applicable

The scheme commenced on:

Not applicable

Relevant facts and circumstances

Entity A supplies the following services to entity B, a non-resident entity:

•         International freight forwarding services, including customs clearance services and the arrangement of international transport.

•         Domestic warehousing/storage services.

•         Domestic delivery services from entity A's warehouse to various locations in Australia.

Entity A is a resident company registered for GST, has no office or presence outside Australia, perform the above services for entity B using personnel based only in Australia and the services provided, except for international transport, is all provided in Australia.

Entity B is a non-resident company that is not registered for GST in Australia and has no presence or intention of establishing a presence in Australia.

Entity A is an agent for entity B and in their capacity as an agent, entity A imports entity B's products into Australia, store these goods in their local warehouse and deliver these goods to entity B's clients upon request.

The imported goods are stored in any available location within entity A's warehouse. There is no dedicated space for these goods within the warehouse. The goods may be stored in entity A's warehouse for days, weeks or months after they have arrived in Australia.

There is no formal written agreement between both parties, but rather a set of written services which are the same for all of entity A's clients.

Entity A is not involved in the invoicing between entity B and their Australian clients.

Entity A's name appears on the importation documents.

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 - subsection 38-190(1) and 38-190(3).

A New Tax System (Goods and Services Tax) Act 1999 - subsection 38-355(1) and 38-355(2).

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

Reasons for decision

Supply of international freight forwarding services including customs clearance services and arrangement of international transport

From the facts given, entity A satisfies all the requirements of paragraphs 9-5(a) to 9-5(d) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as:

(a)  they receive consideration for their supply of arranging international freight forwarding services and customs clearance services;

(b)  they make this supply in the course or furtherance of an enterprise that they carry on;

(c)   their supply is connected with Australia as they make this supply through an enterprise that they carry on in Australia; and

(d)  they are registered for GST in Australia.

The supply of international freight forwarding services and customs clearance services by entity A to a non-resident entity is not input taxed under any provisions of the GST Act or any other legislation. The next step is to determine whether this supply will be GST-free under the GST Act.

Section 38-355 of the GST Act specifies the general rules for the GST-free supplies of international transport of goods and related matters. The purpose of this section is to allow only certain aspects of the supply of transportation of goods to be GST-free.

Items 5 and 5A in the table in section 38-355 of the GST Act (Items 5 and 5A) allow for the GST-free transport of goods in certain circumstances as follows:

•         38-355 Supplies of transport and related matters

•         (1) 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 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).

In relation to the customs clearance services entity A provides, Item 5A(b) in the table in subsection 38-355(1) of the GST Act ensures that the supply of customs clearance services which facilitate the international transport from outside of Australia continues to be GST-free. Additionally, since the recipient of the supply is a non-resident and is not in Australia when the customs clearance services are provided, subsection 38-355(2) of the GST Act does not apply.

In relation to the international transport 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 of Australia to the port or airport of 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.

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

place of consignment of goods means:

(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

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

The Explanatory Memorandum to the Tax Laws Amendment (2010 GST Administration Measures No.3) Bill 2010 (EM) provides guidance for a transportation document. Paragraphs 1.18 and 1.20 of the EM state:

1.18 The primary agreement for the importation of goods refers to the agreement under which goods are delivered into Australia under the contract for the supply of the goods or where a local entity brings the goods to Australia, the primary agreement is the agreement for the transport of the goods to Australia.

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.

The 'place of consignment' for goods transported into Australia will be determined with reference to an agreement for the transport of goods to Australia. It does not have to be a formal written agreement. Once the place of consignment is decided, it will determine the extent to which transport services associated with bringing these goods to entity A's warehouse will be GST-free.

Entity A arranges for the international transport of entity B's goods to Australia. There is no formal written agreement with entity B which states that entity A will provide international freight forwarding and warehousing services. Instead, entity A has a document which lists their services provided (list of services document), this document is the same for all of entity A's clients.

We take the view that entity A has an overarching agreement with entity B to deliver their goods to entity A's warehouse. This is reflected by the list of services document. We acknowledge that both entity A and B have acted in such a way that construes an agreement for delivery of entity B's goods to entity A's warehouse.

Therefore, in accordance with the definition of 'place of consignment' found in section 195-1(ab) of the GST Act, entity A's warehouse is the place of consignment for the purposes of Item 5(b) in the table in subsection 38-355(1) of the GST Act.

Consequently, entity A's supply of international transport services for entity B is GST-free under Item 5(b) of subsection 38-355 of the GST Act from a place outside Australia to their place of consignment in Australia which will be entity A's warehouse and the invoice(s) to entity A's client for this service should not include a charge for GST.

Supply of domestic warehousing services

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.

Item 2 in the table in section 38-190(1) of the GST Act (Item 2) allow GST-free supplies to non-residents outside the indirect tax zone as follows:

•         38-190 Supplies of things, other than goods or real property, for consumption outside the indirect tax zone

•         (1) The third column of this table sets out supplies that are GST-free (except to the extent that they are supplies of goods or *real property):

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:

(a)  any interest in or right over land; or

(b)  a personal right to call for or be grated ay interest in or right over land; or

(c)   a license to occupy land or any other contractual right exercisable over or in relation to land.

Paragraph 106 of Goods and Services Tax Ruling GSTR 2003/7: what do the expressions 'directly connected with goods or real property' and 'a supply of work physically performed on goods' mean for the purposes of subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999? (GSTR 2003/7) deals with the provision of storage services, without rental of a particular site. 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 imported goods are stored in entity A's warehouse in any available location, there is no specific area set-aside for these goods. Additionally, the supply of storage facilities is not a supply of work physically performed on these goods nor a supply directly connected with real property. The supply is also made to a non-resident who is not in Australia when the supply of storage is done.

Therefore, entity A's supply of domestic warehousing/storage is GST-free under Item 2(a) in the table in subsection 39-190(1) of the GST Act and the invoice(s) to entity B for this service should not have a charge for GST.

Supply of domestic delivery services

As mentioned previously, Item 2 in the table in subsection 38-190(1) of the GST Act (Item 2) allow GST-free supplies to non-residents outside the indirect tax zone.

Paragraph 18 and 59 of GSTR 2003/7 provides guidance in respect of Item 2 in relation to entity A's domestic delivery services:

18. Under paragraph (a) of item 2, a supply of a thing that is made to a non-resident who is not in Australia when the thing supplied is done, is not GST-free if the supply is directly connected with real property situated in Australia or is a supply of work physically performed on goods situated in Australia when the work is done. (However, a supply of this kind is GST-free under paragraph (b) of item 2 if the non-resident acquires the thing in carrying on the non-resident's enterprise but is not registered or required to be registered).

59. ... a supply of transporting goods is not work physically performed on goods because the supply only changes the location of the goods, not the goods themselves.

Entity A makes a supply of domestic delivery services to a non-resident who is not in Australia when the thing is supplied, and the supply of domestic delivery services is not directly connected with real property and is not a supply of work physically performed on goods situated in Australia.

Where entity A's supply of domestic delivery services satisfies the requirements of Item 2 in the first instance, we must turn our attention to subsection 38-190(3) of the GST Act which excludes some supplies from the GST-free status afforded by item 2.

Subsection 38-190(3) of the GST Act states:

(3)    Without limiting subsection (2) or (2A), a supply covered by Item 2 is not GST-free if:

(a)       it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and

(b)       the supply is provided, or the agreement requires it to be provided, to another entity in Australia.

(c)       for a supply other than an input taxed supply - none of the following applies:

(i)    the other entity would be an Australian-based business recipient of the supply, if the supply had been made to it;

(ii)   the other entity is an individual who is provided with the supply as an employee or officer of an entity that would be an Australian-based business recipient of the supply, if the supply had been made to it; or

(iii)  the other entity is an individual who is provided with the supply as an employee or officer of the recipient, and the recipient's acquisition of the thing is solely for a creditable purpose and is not a non-deductible expense.

Subsection 9-26(2) of the GST Act states:

(2)    An entity is an Australian-based business recipient of a supply made to the entity if:

(a)       the entity is registered; and

(b)       an enterprise of the entity is carried on in the indirect tax zone; and

(c)       the entity's acquisition of the thing supplied is not solely of a private or domestic nature.

Entity A holds entity B's goods in their warehouse for an indefinite amount of time and delivers them to entity B's clients in Australia. At a practical level, the domestic delivery services are supplied to the non-resident company, entity B, but is provided to the non-resident's clients in Australia. Although the non-resident recipient of the supply, entity B, is not in Australia, consumption of the supply is in Australia because the supply is provided to an entity in Australia.

We consider it reasonable to conclude that the domestic delivery services are provided to another entity in Australia, entity B's clients. Paragraph 38-190(3)(b) of the GST Act is therefore satisfied. Furthermore, entity A's supply of domestic delivery services is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) of the GST Act is therefore satisfied.

However, under paragraph 38-190(3)(c) of the GST Act if the domestic delivery is made to an Australian-based business recipient, then subsection 38-190(3) of the GST Act will not negate the GST-free status available under Item 2 and entity A's supply will be GST-free under Item 2.

Therefore, if the recipient of the supply of domestic delivery services is not an Australian-based business entity, subsection 38-190(3) of the GST Act will negate the GST-free status available under Item 2 and this supply will be a taxable supply under section 9-5 of the GST Act.