Edited version of private advice

Authorisation Number: 1052181468626

Date of advice: 13 December 2023

Ruling

Subject: Acquisition of goods for export

Question

Are you making a creditable acquisition of grains and pulses under section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 when you purchase the goods on a delivered container terminal basis?

Answer

Yes, you are making a creditable acquisition of the goods. As long as you hold valid tax invoices you are entitled to claim the input tax credit because the supply of the goods to you is not GST-free.

This ruling applies for the following period

All tax periods ending on or after 30 November 2019

Relevant facts and circumstances

You purchase goods to export to destinations outside of Australia. You are registered for GST.

The suppliers (packers) you purchase from currently are registered for GST.

You purchase the goods on a 'delivered container terminal' (DCT) basis from the packers. DCT is not an Incoterm. DCT is defined by the Grain Trade Australia (GTA) Trade Rules to mean delivered to a nominated container terminal in an appropriately presented shipping manner.

Under the DCT arrangements:

•         The packers are responsible for delivering the goods to your nominated terminal gate. All costs/charges to the terminal gate are paid by the packers. You pay for all costs/charges after the goods have reached the terminal gate (apart from wharf charges).

•         Risk and title to the goods passes from the packers to you upon delivery at the terminal gate before it is loaded on board the shipping vessel.

•         You obtain at your own risk and expense any import licence or other official authorisation and carry out all customs formalities for the import of the goods and for their transport through any other country.

•         You may advise the packers of any additional requirements (at your cost) relating to import certification.

You issue an order to the packers and provide an invoice to the buyers.

The export documentation lists you as the 'exporter'.

A Phytosanitary certificate is required by the Department of Agriculture, Fisheries and Forestry in order to comply with export laws and you make the request for this certificate. This certificate must always be requested by the exporter (or their agent).

You apply for an export declaration number (EDN) and send the EDN to the packers. The EDN is required for the goods to be delivered to the terminal gate.

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 section 11-5

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

Creditable acquisition

Generally, an entity that is registered for GST is entitled to claim the input tax credits on any creditable acquisition it makes. However, if the thing acquired is not subject to GST, then there is no entitlement.

Section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you make a creditable acquisition if:

(a)  you acquire anything solely or partly for a creditable purpose; and

(b)  the supply of the thing to you is a taxable supply; and

(c)   you provide or are liable to provide consideration for the supply; and

(d)  you are registered or required to be registered for GST.

You purchase goods from the suppliers (packers), your acquisition is for a creditable purpose because the acquisition is made in carrying on your enterprise; doesn't relate to making input taxed supplies (such as residential rent or financial supplies); and isn't of a private or domestic nature. You provide consideration (payment) for the acquisition and you are registered for GST. Therefore, paragraphs 11-5(a), 11-5(c) and 11-5(d) of the GST Act are satisfied.

However, if the supply of the goods to you by the packers is not a taxable supply, then paragraph 11-5(b) of the GST Act will not be met.

Taxable supply

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 Australia; 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.

Even though the supply of goods by the packers satisfies all the requirements under section 9-5 of the GST Act, if the supply is GST-free, it is not a taxable supply.

Export of goods

Section 38-185 of the GST Act provides a range of circumstances in which a supply of goods is GST-free in relation to exports. Relevantly, table item 1 of subsection 38-185(1) of the GST Act (item 1) states:

Table 1: Subsection 38-185(1) of the GST Act (item 1) states:

The Goods and Services Tax Ruling; Goods and services tax: export of goods, items 1 to 4A of the table in subsection 38-185(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GSTR 2002/6) discusses in the application of GST to exports in detail. Paragraph 22 of GSTR 2002/6 states:

22. The requirement that the supplier is the entity that exports the goods is satisfied where either:

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

(b) the supplier 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; or

(c) the requirements of subsection 38-185(3) are met (see paragraphs 67 to 81).

The documentary evidence must show that the goods were delivered by the supplier into the control of a ship or aircraft operator, and that the ship or aircraft operator has been contracted to carry the goods to a destination outside Australia.

As explained in paragraphs 24-26 of GSTR 2002/6, an entity is accepted as having exported goods where the contracted terms of trade provide that the goods are sent from Australia to another country. Appendix C of GSTR2002/6 lists the following trade terms as GST-free:

•         free on board (FOB) - the seller delivers the goods over the ship's rail at the port of shipment. The seller also clears the goods for export.

•         free alongside ship (FAS) - the seller places the goods alongside the vessel nominated by the buyer. The seller also clears the goods for export; or

•         free carrier (FCA) - the seller delivers the goods to the carrier nominated by the buyer. The seller also clears the goods for export.

Each of the above terms require the goods to be delivered to a freight carrier that has been contracted by the supplier to ship the goods from Australia. This is significantly different to delivered container terminal (DCT) arrangements because the terms of trade only require the goods to be delivered to the terminal gate and the purchaser is then required to contract for the movement of those goods to the freight carrier and clear the goods for export.

That is, the packers are not responsible for delivering the goods on board a ship (or freight carrier) that has been engaged to carry them to an overseas destination. The packers' responsibility ends at the terminal gate as title and risk of the goods transfers to you. A supplier does not export the goods where the supplier's responsibility only extends to delivering the goods in Australia to a person who is not the operator of a ship or aircraft engaged to carry them out of Australia.

Further, paragraphs 110, 118, 121 and 125 of GSTR 2002/6 state:

110. This approach recognises that the supplier has put the goods into a position which means that the goods are for export and not for use or consumption in Australia. Also, in each case, it is the acts of the supplier alone which determine whether the supplier satisfies the primary element of a GST-free export (i.e., 'the supplier exports'). The supplier has access to documents which evidence the particular acts which the supplier carried out in sending the goods overseas.

118. Where a supplier does not enter an international contract of carriage in respect of the goods supplied, it is necessary to look at where, or to whom, the supplier delivers the goods. If the supplier delivers the goods to the operator of a ship or aircraft, we accept that the 'supplier exports'.

121. In the case of containerised cargo carried out of Australia by ship, we accept that the supplier exports the goods where the supplier is responsible for delivering the container into the custody of the operator of the ship at the port of shipment. This is usually achieved by physically transferring control of the goods to the stevedore who is accepting and loading goods for the shipping operator.

125. Where a supplier is only responsible for delivery of the goods at a place inside Australia and to a person in Australia who, or that, is not a ship or airline operator, the supplier is not considered to be the exporter. This is the case under an Ex-works (EXW) or Free Carrier (FCA) contract of sale where the supplier is only required to deliver the goods either at the supplier's own premises, or to a carrier, other than a ship or aircraft operator, named by the buyer. The named carrier may be an agent of the buyer, a freight forwarder, consolidator, or any other third party who, or that, is not a ship or airline operator contracted to carry the goods to an overseas destination. If the supplier is not the exporter, the supply is not GST-free under item 1 or 2 unless the requirements of subsection 38-185(3) are met...

The packers sell the goods to you, and you then export and sell (in your own right) those goods to the overseas buyers. You arrange and contract with freight carriers to book the vessel and clear the goods at customs. Under DCT arrangements, the packers deliver the goods to you at the gate of your nominated terminal. You are liable for the expenses to the international carrier for the transportation of goods outside Australia.

As explained at paragraph 27 of GSTR 2002/6, 'a supplier does not export goods where the supplier's responsibility only extends to delivering the goods in Australia to a person who is not the operator of a ship or aircraft engaged to carry them out of Australia'. As the packers are contracted to deliver the goods to the terminal gate under the DCT terms, the packers are not considered to be exporting the goods for the purposes of the GST Act.

Although subsection 38-185(3) of the GST Act further provides that a supplier who has not exported the goods is treated as having exported the goods for the purposes of item 1 if certain conditions are met, one of those conditions is that the supply is made to an entity that is not registered or required to be registered for GST. As you are registered for GST, subsection 38-185(3) of the GST Act cannot apply.

Conclusion

The supply by the packers is not GST-free as the packers do not contract for the goods to be exported. As such, the supply by the packers does not satisfy the requirements of item 1 of the table in subsection 38-185(1) of the GST Act and therefore the supply by the packer to you is not GST-free.

Consequently, the sale of the goods by the packers to you is a taxable supply to you and you are entitled to the input tax credits as you have made a creditable acquisition under section 11-5 of the GST Act provided you hold valid tax invoices.