ATO ID 2003/14: GST and the delivery of mineral ore to a common stockpile
Date of decision: 11 April 2002
Business line: Indirect Tax

Issue
Is entity A, an ore supplier, making a taxable supply to entity B, another ore supplier, under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when entity A delivers ore to a common stockpile for blending with entity B's ore?

Decision
No, entity A is not making a taxable supply to entity B under section 9-5 of the GST Act when it delivers ore to a common stockpile for blending with entity B's ore. In this situation, there is no supply being made by entity A to entity B.

Facts
Entity A is an ore supplier. Entity B is another ore supplier. Both entity A and entity B enter into separate contracts to supply ore to a single purchaser. Entity A has not entered into any agreement to supply any goods or services to entity B. Conversely, entity B has not agreed to supply any goods or services to entity A. Under the terms of the contract of sale, entity A is required to deliver the ore to a common stockpile where it is blended with other similar ore (including the ore belonging to entity B) and then loaded on board a vessel for transport. Once the various ores are blended in the common stockpile, a new and specific blend of ore is created. The ore is blended due to the delivery requirements of the purchaser and not as a result of any agreement between entities A and B. Entity B does not obtain any rights in relation to entity A's ore. Entity A is registered for goods and services tax (GST).

Reasons for decision
Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: The first element in section 9-5 of the GST Act requires that an entity make a supply for consideration. In this case, entity A has entered into a contract with the purchaser for the supply and delivery of a specific type of ore to a common stockpile. Entity A has not entered into any agreement to supply any goods or services to entity B. Conversely, entity B has not agreed to supply any goods or services to entity A. Although the ore of entity A is blended in the common stockpile with the ore of entity B, entity B does not obtain any rights in relation to entity A's ore. The ore is blended due to the delivery requirements of the purchaser and not as a result of any agreement between entities A and B. Therefore, there is no supply of ore from entity A to entity B, and the first requirement in section 9-5 of the GST Act is not met. As such, entity A is not making a taxable supply to entity B under section 9-5 of the GST Act when it delivers ore to a common stockpile for blending with entity B's ore.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5
Subject references: Goods and services tax GST supplies & acquisitions Taxable supply Supply