Private ruling: Goods and services tax (GST) and a supply of freight transport to a non-resident company
Date of advice: 14 December 2017
Published: May 2018

Ruling: Q1: Is GST payable on your delivery of company X’s goods from the fulfilment centre to the address of the Australian buyer of the goods where the goods were sent to Australia to meet a pre-order and you are hired by company X to transport the goods to Australia? | A1: GST is not payable on your supply of any part of the transport service under this scenario, provided that you hold a copy of the relevant overarching agreement (the sale of goods agreement) that verifies that the place of consignment is the buyer’s address. However, if you do not have access to the sale of goods agreement, the Australian Taxation Office (ATO) permits you to assume that the place of consignment is at the terminal gate of the port of airport of discharge as specified in the relevant Bill of Lading or Airway Bill. If you apply this policy, then you will treat the transport service from the fulfilment centre to the buyer’s address as subject to GST. | Q2: Is GST payable on your delivery of company X’s goods from the fulfilment centre to the address of the buyer of the goods where the goods were sent to Australia to meet a pre - order, company X hires another transport company to transport the goods to Australia and you are hired by company X to transport the goods from the fulfilment centre to the buyer’s address only? | A2: Yes. | Q3: Is GST payable on your delivery of company X’s goods from the fulfilment centre to the address of the buyer of the goods where the goods were not sent to Australia to meet a pre-order and company X contracts you to transport the goods to Australia? | A3: Yes. | Q4: Is GST payable on your delivery of company X’s goods from the fulfilment centre to the address of the buyer of the goods where the goods were not sent to Australia to meet a pre-order, company X hires another transport company to transport the goods to Australia and you are hired by company X to transport the goods from the fulfilment centre to the buyer’s address only? | A4: Yes.

Relevant facts and circumstances: You are registered for GST. You operate a logistics/transport business, which is based in Australia. You are being engaged by an overseas company, company X, a vendor of goods, to take care of the import handling of their goods from overseas country X to Australia (import clearance, delivering whole containers to an Australian fulfilment centre operated by company X, import customs brokerage and delivery to the buyer for the sold items). Company X will also engage you to deliver goods, carried by other logistic providers to Australia, from the Australian fulfilment centre to the Australian buyers. Company X pays you for your services. Most of the items company X sells to Australian buyers will be sent to Australia to meet an existing buyer’s order, but some items will be sent to the fulfilment centre in anticipation of new buyers to buy the stock at a later time. Most buyers will not be registered for GST and will buy the goods for their private or domestic use.

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 11-15 | A New Tax System (Goods and Services Tax) Act 1999 section 38-190 | A New Tax System (Goods and Services Tax) Act 1999 section 69-5

Reasons for decision: Summary: In your case, company X will sell goods to Australian buyers. Under one type of arrangement, company X will send goods to Australia to meet a pre-order and paragraph (aa) of the definition of ‘place of consignment’ is relevant to these arrangements. The place of consignment will be the buyer’s address, as this is the place in Australia to which the goods are to be delivered under the contract for the supply of the goods. Under that scenario, your delivery of the goods from overseas to the buyer’s address in Australia will be the international transport of goods from a place overseas to their place of consignment in Australia. Some of that service will be done in Australia. The customer is a non-resident, but they are in Australia by virtue of their fulfilment centre in Australia, in which company X temporarily stores the goods (in accordance with paragraphs 37 and 41 of Goods and Services Tax Ruling GSTR 2004/7). However, as you will be contracted by the vendor to transport the goods to Australia, the work you do in Australia will not be excluded from being GST-free under item 5 in the table in subsection 38-355(1) of the GST Act by subsection 38-355(2) of the GST Act under such circumstances. Therefore, where the goods are sent to Australia to meet a pre-order and you are hired by company X to transport the goods from overseas to their customer in Australia, your transport service from the fulfilment centre to the customer’s address is GST-free. Hence, GST is not payable on your supply of any part of the transport service under this scenario, provided that you hold a copy of the relevant overarching agreement (the sale of goods agreement) that verifies that the place of consignment is the buyer’s address. However, in accordance with the fact sheet, GST and international freight transport , if you do not have access to the sale of goods agreement, the ATO permits you to assume that the place of consignment is at the terminal gate of the port of airport of discharge as specified in the relevant Bill of Lading or Airway Bill. If you apply this policy, then you will treat the transport service from the fulfilment centre to the buyer’s address as subject to GST. Under the scenario in question 2: ● the goods are sent to Australia to meet a pre-order; and ● the vendor contracts another transport company to transport the goods to Australia; and ● you are hired by company X to transport the goods from the fulfilment centre to the buyer’s address only Under this scenario, the place of consignment for the international transport would be determined under paragraph (aa) of the definition of that concept in section 195-1 of the GST Act. The place of consignment under the international transport arrangement would be the buyer’s address, as that is the place to which the vendor is required to deliver the goods under the sale of goods agreement. Therefore, your transport of the goods from the fulfilment centre to the buyer’s address would be part of the international transport of the goods from a place outside Australia to their place of consignment relating to the international transport under the scenario in question 2. However, under the scenario in question 2: ● the transport of the goods from the fulfilment centre to the buyer’s address would be done in Australia ● although company X is a non-resident, it is in Australia by virtue of its fulfilment centre in Australia, and ● you would not be transporting the goods to Australia. Therefore, the exclusion at subsection 38-355(2) of the GST Act would apply to your transport of the goods from the fulfilment centre to the buyer’s address under the scenario in question 2. Hence, your supply of this transport would not be GST-free under item 5 in the table in subsection 38-355(1) of the GST Act under such circumstances. Your supply of the transport service would not be GST-free under item 2 in the table 38-190 because although you are making a supply to a non-resident, the non-resident is in Australia by virtue of their fulfilment centre in Australia. There are no other provisions of the GST Act under which your supply of the transport service under scenario 2 would be GST. Hence, as all of the requirements of section 9-5 of the GST Act are met, GST is payable on this transport service. Where the goods are not brought to Australia pursuant to a sale of goods agreement and company X contracts you to transport the goods to Australia, the place of consignment would be determined under paragraph (ab) of the definition of place of consignment in section 195-1 of the GST Act. The place of consignment would be the final destination to which you are required to deliver the goods under the international transport contract, which is the fulfilment centre. The buyer’s address would not be the place of consignment under the international transport arrangement, as at the time the international transport arrangement is entered into, no buyer has been found. Therefore, your supply of the transport service from the fulfilment centre to the buyer’s address would not be GST-free under item 5 in the table in subsection 38-355(1) of the GST Act in the scenario in question 3 as this transport service happens after the place of consignment in relation to the international transport arrangement. Your supply of the transport service would not be GST-free under item 2 in the table in subsection 38-190(1) of the GST Act because although you are making a supply to a non-resident, the non-resident is in Australia by virtue of their fulfilment centre in Australia. Hence, GST would be payable on your transport service from the fulfilment centre to the buyer’s address under the scenario in question 3 as all of the requirements of section 9-5 of the GST Act would be met. Under the scenario in question 4: ● the goods are not brought to Australia pursuant to a sale of goods agreement; and ● a company other than you is contracted by the vendor to transport the goods to Australia; and ● the vendor separately contracts you to deliver the goods from the fulfilment centre to the buyer’s address only. In these situations, the place of consignment would be determined under paragraph (ab).of the definition of that concept in section 195-1 of the GST Act. The place of consignment under the international transport arrangement would be no further than the fulfilment centre. Therefore, your supply of the transport service from the fulfilment centre to the buyer’s address would not be GST-free under item 5 in the table in subsection 38-355(1) of the GST Act in the scenario in question 4 as this transport service happens after the place of consignment in relation to the international transport arrangement. Your supply of the transport from the fulfilment centre to the buyer’s address would not be GST-free under item 2 in the table in subsection 38-190(1) of the GST Act, because you are making a supply of a service to a non-resident who is in Australia by virtue of their fulfilment centre in Australia. Therefore, GST would be payable on your transport service from the fulfilment centre to the buyer’s address under the scenario in question 4 as all of the requirements of section 9-5 of the GST Act would be met.

Reasons for decision: GST is payable on taxable supplies. | You make a taxable supply where you meet the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which 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 the indirect tax zone; 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. | (* Denotes a term defined in section 195-1 of the GST Act) | The indirect tax zone is Australia. | In your case, you meet the requirements of paragraph 9-5(a) to 9-5(d) of the GST Act. That is: | ● you are supplying transport services for consideration (paragraph 9-5(a) of the GST Act) | ● you are supplying the transport services in the course or furtherance of an enterprise that you carry on (paragraph 9-5(b) of the GST Act) | ● the supply is connected with Australia as you supply the transport services through an enterprise that you carry on in Australia (paragraph 9-5(c) of the GST Act); and | ● you are registered for GST (paragraph 9-5(d) of the GST Act). | There are no provisions of the GST Act under which your supply of the transport service would be input taxed. Therefore, what remains to be determined is whether your supply of the transport service is GST-free. | The supply of the transport services in question will be GST-free if it meets the requirements of item 5 in the table in subsection 38-355(1) of the GST Act or item 2 in the table in subsection 38-190(1) of the GST Act. | GST-free international transport of goods | Paragraph (b) of item 5 in the table in subsection 38-355(1) of the GST Act provides that, subject to subsection 38-355(2) of the GST Act, the international transport of goods from a place outside Australia to their place of consignment in Australia is GST-free. | Subsection 38-355(2) of the GST Act provides that paragraph (b) of item 5 does not apply to a supply to the extent that the thing supplied is done in Australia unless: | (a) the recipient of the supply: | (i) is a non-resident; and | (ii) is not in Australia when the thing supplied is done in Australia; or | (b) the supply is done by the supplier of the transport of the goods to Australia. | Paragraph (b) of section 195-1 of the GST Act provides that ‘international transport’ means, in relation to the import of goods, the transport of the goods from a place outside Australia to their place of consignment in Australia. | Section 195-1 of the GST Act provides that the ‘place of consignment’ means: | (a) if the goods are posted to a place in Australia – the place in Australia to which the goods are addressed; or | (aa) if the supplier of the goods is to deliver the goods to a place in Australia – | the place in Australia to which the goods are delivered under the contract for the supply of the goods; or | (i) neither paragraph (a) nor (aa) applies; and | (ii) the goods are to be transported into Australia by an entity supplying a transport service to an entity that is to import the goods into Australia; | the place in Australia to which the goods are to be delivered under the contract for the supply of the transport service; or | (b) in any other case – the port or airport of final destination as indicated on the transportation document.