ATO ID 2015/26: GST and inwards port service charges
Date of decision: 28 September 2015
Business line: Indirect Tax

Issue
Are the fees paid for loading, handling and associated activities consideration for GST-free supplies of international transport made by the non-resident shipping line under item 5 in subsection 38-355(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Decision
Yes. The fees paid for loading, handling and associated activities form part of the consideration for a GST-free supply of international transport made by the non-resident shipping line and are therefore GST-free under item 5 in subsection 38-355(1) of the GST Act.

Facts
The non-resident shipping line enters into an international carriage contract (either through its Australian agent or independently) with Australian resident and non-resident customers for the international shipping of goods to the indirect tax zone (the extent of 'Australia' for GST purposes as defined in section 195-1 of the GST Act). A document called a bill of lading or ocean bill of lading (or similar) is issued to the relevant parties and this document includes details such as the consignor, consignee, port of discharge and if the delivery point is beyond the port of discharge, the place of delivery of the goods. The non-resident shipping line does not generally hold, or have access to, the relevant sale of goods contract for the freight it carries. Under the sale of goods contract the buyer and seller determine which party is responsible for the transport costs in sending the goods to the indirect tax zone. Importation of the cargo is not the responsibility of the shipping line. The shipping line's Australian agent looks after all of the indirect tax zone based aspects of the line's international shipping operations including; arranging the docking and unloading of vessels at indirect tax zone ports, delivery of the goods (where the Place of Delivery is in the indirect tax zone), preparation of the necessary indirect tax zone import documentation and the inspection of shipping containers returned in the indirect tax zone. The shipping line (independently or via its Australian agent) invoices the customer cost elements for various supplies that are separate to the cost of the ocean freight including (but not limited to): While the fees for the services are itemised separately, they are still invoiced in accordance with the standard services supplied under the international carriage contract between the customer and the shipping line for the provision of international shipping services. The shipping line does not have any separate agreement with the customer for supplying the services or charging these fees.

Reasons for decision
Summary: The services charged for by the non-resident shipping line (or its agent) to its customer form part of the supply of international transport. The supply of international transport by a shipping line is GST-free under item 5 in the table under subsection 38-355(1) up to and including the activities carried out by the shipping line at the port of discharge. The fees in question are for activities necessarily carried out by the shipping line (or acquired by the shipping line) in transporting the cargo and are included in the standard services supplied by the shipping line under the international carriage contract. Under item 5 in subsection 38-355(1) the inbound international transport of goods is GST-free to the place of consignment in the indirect tax zone. The 'place of consignment' is set out in section 195-1 of the GST Act: As the non-resident shipping line does not generally hold or have access to the sales contract relevant to the freighted goods, it will not be able to determine where the place of consignment is under its contractual relationship with the customer. In these circumstances, the ATO allows the shipping line to assume that the place of consignment under paragraphs (aa) or (ab) should be at least at the port of discharge specified on the relevant Bill. The ATO accepts that the port of discharge in these circumstances is the 'terminal gate' and therefore activities carried out at the port are within the place of consignment. This means that services related to the transport and handling of the goods (including issuing or processing associated documentation) made by the shipping line under its international carriage contract will be GST-free if the goods are released to the customer at the port of discharge, as these services are made at, or prior to, the place of consignment. If the goods are released to the customer after the port of discharge (that is, beyond the terminal gate) then all services after the terminal gate can only be treated as GST-free by the shipping line if it obtains information from the buyer or seller of the goods that the place of consignment of the goods is a place beyond the port of discharge. This outcome ensures that all services performed by the shipping line at the port in fulfilling its international transport contract can be included as GST-free international transport with the services having the same GST treatment as the international transport. The services included as part of GST-free international transport are typically activities associated with transport that are normally carried out under a bill of lading (standard international carriage contract). Note that item 5 is limited by subsection 38-355(2) of the GST Act under which the transport of goods to and from the indirect tax zone can only be GST-free under item 5 where either: In the circumstances at hand subsection 38-355(2) will not limit item 5 given the transport services within the indirect tax zone are being supplied by the shipping line that transported the goods to the indirect tax zone.

Legislative references: A New Tax System (Goods and Service Tax) Act 1999 subsection 38-355(1) subsection 38-355(2) section 195-1
Related public rulings and determinations: GSTR 2003/15
Subject references: Bill of lading Goods and services tax GST transport Transport of goods