ATO ID 2013/37: GST and ship's stores
Date of decision: 02 July 2013
Business line: Interpretative Assistance Technical Projects, ITX

Issue
Is the entity making GST-free supplies of ship's stores to passengers and crew under item 5 in the table in subsection 38-185(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells certain types of merchandise on board a ship undertaking an international voyage?

Decision
No. The entity is not making GST-free supplies of ship's stores to passengers and crew.

Facts
The entity makes retail sales on passenger cruise ships. Sales are made to passengers and crew while the ship is in Australia. The ship is to depart on a voyage which has a destination outside Australia. The merchandise sold to passengers and crew include:

Reasons for decision
Summary: The on board sale of ship's stores is a GST-free export of goods where item 5 in the table in subsection 38-185(1) of the GST Act (Item 5) is satisfied. Item 5 requires that: In this case, the ship is on an international voyage and it is necessary to consider the first two requirements only. To meet Item 5, goods sold through a retail store on board must be properly regarded as 'stores'. If the goods are of a type capable of being stores those goods must be supplied for the purpose of being used or consumed on board the ship by, in this instance, the purchaser. 'Ship's stores' takes its meaning from section 130C of the Customs Act 1901 and is defined as 'stores for the use of the passengers or crew of a ship, or for the service of the ship'. Goods of a type normally considered to be stores are general provisions for the comfort and consumption of passengers and crew whilst they are on board the ship and consumables necessary for the operation and maintenance of the ship. Accordingly goods that are intended to be consumed by a person on board the ship such as food, water, beverages and tobacco, and goods that are intended to be consumed in the operation and maintenance of the ship such as fuel, are commonly regarded as ship's stores. | Detailed Reasoning - Durable goods - fashion clothing and accessories, electronic goods, and jewellery: Durable goods have a long life span and usage period, therefore it can be expected that these types of goods will be removed from the ship by the purchaser and used over a long period of time beyond the cruise. Goods sold that are of a durable nature will not be ship's stores if it cannot be established that the goods are specifically for the purchaser's use on the cruise. Use, in this context, would include goods that make the cruise more comfortable and excludes goods that are more relevant to use after the cruise. The supply of a beach towel on luxury cruise ship that has a swimming pool or the supply of a sunhat would be durable items that would be GST-free ship's stores because these goods would specifically be for the purchaser's use on the cruise. However, durable goods such as fashion clothing and accessories, electronic goods, and jewellery sold on board will not be GST-free ship's stores because they would be mainly relevant to use after the cruise. | Detailed Reasoning - Consumables - Alcohol and tobacco that is not made available for consumption during the cruise: Alcohol and tobacco are normally considered to be stores when they are supplied for the consumption of passengers and crew whilst on board the ship. Where it is known when the goods are sold that the goods will not actually be used or consumed on board, for example bottles of alcohol and cartons of cigarettes which must be taken ashore when the passenger disembarks, the goods will not be GST-free supplies of ship's stores. | Detailed Reasoning - Consumable - Perfumes and cosmetics: These goods are sold in quantities whereby it is not reasonable to expect that they will be substantially consumed on board the ship on a cruise of a short duration. Therefore, goods of this kind are not in the nature of general provisions and are therefore not capable of being stores. Accordingly these items will not be GST-free supplies of ship's stores. Note: Goods that are in the nature of general provisions including hygiene and medicinal products, accessories of a protective nature, clothing relevant to a cruise, batteries for electronic goods and souvenir items would be considered ship's stores. GSTR 2003/4 provides further guidance on what goods are ship's stores for the purposes of Item 5.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 item 5 in the table in subsection 38-185(1) section 195-1
Related public rulings and determinations: GSTR 2003/4
Subject references: Goods and services tax GST exports Goods consumed on international flights or voyages Export of goods GST imports and exports Ship's stores