GST and domestic transport

Is the entity, a domestic transport company, making a GST-free supply under item 5 of section 38-355 of A New Tax System (Goods and Services Tax Act) 1999 (GST Act) when it packs and transports goods within Australia, that are to be exported by a resident manufacturer?

No, the entity is not making a GST-free supply under item 5 of section 38-355 of the GST Act when it packs and transports goods within Australia, that are to be exported by a resident manufacturer.

The entity is a domestic transport company that receives goods that are to be exported by a resident manufacturer. The entity packs the goods into freight containers and transports the packed freight container to the wharf.

The resident manufacturer contracts with another transport company to perform the transport of goods from the wharf to its destination outside Australia.

The entity is registered for goods and services tax (GST). The supply meets the other positive limbs of section 9-5 of the GST Act.

Item 5 of section 38-355 of the GST Act (item 5) specifies the circumstances where the supply of international transport of goods is GST-free. Of particular relevance to this case, is paragraph (a) of item 5 which provides that the supply of international transport of goods is GST-free from their place of export in Australia to a destination outside Australia.

International transport in relation to the export of goods is defined in section 195-1 of the GST Act to include the loading and handling of goods within Australia that is part of that transport. The term place of export is also defined in section 195-1 of the GST Act. The definition provides that where goods are packed in a freight container the place of export is the place where they were so packed. Therefore, in some instances, the supply of transport and associated handling provided within Australia will be GST-free

However, paragraph (a) of item 5 only applies to the transport of the goods within Australia if it is supplied by the supplier of the transport of the goods from Australia. Therefore, in order for the domestic transportation from the place where the goods were packed into the freight container to the wharf to be GST-free, it must be supplied by the same entity who supplies the transportation of the goods to a destination outside Australia.

In this case, the entity is not supplying the transportation of the goods to a destination outside Australia; it only supplies the domestic packing and haulage services. Therefore, the entity is not making a GST-free supply of international transport under item 5.

The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply of freight packing and domestic transportation under section 9-5 of the GST Act. [Note: If the entity purchases international transportation and then supplies its clients with an integrated service that includes freight container packing, domestic transport and international transport, the entity is making a GST-free supply of international transport under item 5 of section 38-355 of the GST Act.]