ATO ID 2004/491: GST and removal of grey waste water from a foreign ship in an Australian port
Date of decision: 2 March 2004
Business line: Indirect Tax

Issue
Is the entity, a supplier of grey waste water removal services, making a GST-free supply for the purposes of item 5 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it removes grey waste water from the holding tank of a foreign ship that arrived from outside Australia and is en route to a destination outside Australia?

Decision
Yes, the entity is making a GST-free supply for the purposes of item 5 in the table in subsection 38-190(1) of the GST Act when it removes grey waste water from the holding tank of a foreign ship that arrived from outside Australia and is en route to a destination outside Australia.

Facts
The entity is a supplier of grey waste water removal services and is registered for goods and services tax (GST). The entity provides its services to a foreign ship that has stopped over in Australia for victualling. The foreign ship arrived from a place outside Australia en route to a destination outside Australia. The entity's services include the removal of grey waste water from the holding tank of the foreign ship in an Australian port and the disposal of the grey waste water through a local council sewerage network.

Reasons for decision
Summary: Under section 38-190 of the GST Act, certain supplies of things other than goods or real property for consumption outside of Australia are GST-free. As the entity's supply of services for the removal of grey waste water is not a supply of goods or real property, its GST status is appropriately considered under section 38-190 of the GST Act. Item 5 in the table in subsection 38-190(1) of the GST Act (Item 5) provides that a supply is GST-free if it is a supply that is constituted by the repair, renovation, modification or treatment of goods from outside Australia whose destination is outside Australia. Paragraph 71 of the Goods and Services Tax Ruling GSTR 2005/2 provides that, amongst other things, ships or aircraft that have arrived in Australia on a predetermined journey to a place outside Australia are goods for the purposes of Item 5. The entity provides its services to remove the grey waste water from the holding tank of a foreign ship that has stopped over in Australia for victualling. The foreign ship arrived from a place outside Australia on a predetermined journey to a destination outside Australia. As the holding tank is a component of the foreign ship, it is a good for the purposes of Item 5. Paragraph 42 of GSTR 2005/2 provides that repair, renovation, modification or treatment is a process applied to existing goods which may involve some change in the nature, form or condition of the existing goods, the substance of which remains unchanged. The entity's service is not a repair, renovation or modification. However, the entity's service may be characterised as being a treatment for the purposes of Item 5 and in this regard, paragraph 37 of GSTR 2005/2 provides: The ordinary meaning of 'treat' is 'to subject to some agent or action in order to bring about a particular result: to treat a substance with an acid' [Macquarie Dictionary 3rd edition]. Processes such as cleaning, sterilising, waterproofing or rust proofing goods are examples of treating goods. The entity's services include the removal of grey waste water from the holding tank of the foreign ship in an Australian port and the disposal of the grey waste water through a local council sewerage network. The entity's service is a process that empties the holding tank of the grey waste water and this process is similar to a cleaning or waterproofing process. The substance and character of the ship remains unchanged. As such, the entity's service for the removal of grey waste water is treatment of goods from outside Australia whose destination is outside Australia. Accordingly, the entity is making a GST-free supply for the purposes of Item 5 when it removes grey waste water from the holding tank of a foreign ship that arrived from outside Australia and is en route to a destination outside Australia.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 38-190 subsection 38-190(1) table item 5
Related public rulings and determinations: Goods and Services Tax Ruling GSTR 2005/2
Subject references: Goods and services tax GST exports Destination outside Australia GST free GST international services Connected with Australia