GST and transport of goods to a destination outside Australia

Is the entity, a freight forwarding company, making a GST-free supply under item 5 in the table in section 38-355 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an integrated transportation service to export goods where the service includes freight container packing, domestic transport and international transport?

Yes, the entity is making a GST-free supply under item 5 in the table in section 38-355 of the GST Act when it supplies an integrated transportation service to export goods where the service includes freight container packing, domestic transport and international transport.

The entity is a freight forwarding company. The entity enters into an agreement with a customer to export goods. Under the agreement, the entity supplies an integrated transportation service that includes freight container packing, domestic transport and international transport.

To export the goods, the entity contracts with a transport company to pack the goods into freight containers and transport the packed freight containers to a wharf. The entity contracts with a different transport company to perform the transport of the goods from the wharf to its destination outside Australia.

The entity is registered for goods and services tax (GST).

Item 5 in the table in section 38-355 of the GST Act (Item 5) specifies the circumstances where the supply of international transport of goods is GST-free. Paragraph (a) of Item 5 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 mean 'the transport of the goods from their place of export in Australia to a destination outside Australia (including loading and handling 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, as international transport in some instances includes the provision of transport and associated handling within Australia, the supply of those services meets the requirements of paragraph (a) of Item 5.

However, paragraph (a) of Item 5 only applies to the transport of the goods within Australia if it is supplied by the supplier that transports 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 as supplies the transportation of the goods to a destination outside Australia.

For the purposes of paragraph (a) of Item 5, a freight forwarder need not be the actual provider of the various components of a freight contract to be the 'supplier' of international transport. Where a freight forwarder draws together various sub-contractors to perform different tasks and then sells a complete and integrated transport package, it is considered that the freight forwarder is the 'supplier' of international transport. It is essential that the actual international transport is a component of this package.

The entity enters into an agreement to supply an integrated transportation service to export goods where that service includes freight container packing, domestic transport and international transport. To do this the entity organises with different transport companies to pack the goods into freight containers, transport the packed freight containers to a wharf, and perform the transport of the goods from the wharf to their destination outside Australia. The entity is drawing together various contractors to perform different tasks and is supplying a complete and integrated transportation service to export the customer's goods. Therefore, the entity is making a GST-free supply to the customer under Item 5.