GST and loading of blended mineral ore onto a vessel bound for overseas

Is the entity, an ore supplier, making a GST-free supply under item 1 in the table in subsection 38-185(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it is contracted to: • supply a type of ore (type A ore) to a common stockpile where it is blended with other ore; and • load the blended ore (type AB ore) onto a vessel bound for overseas?

No, the entity is not making a GST-free supply under item 1 in the table in subsection 38-185(1) of the GST Act when it is contracted to: • supply a type of ore (type A ore) to a common stockpile where it is blended with other ore; and • load the blended ore (type AB ore) onto a vessel bound for overseas.

The entity is making a taxable supply under section 9-5 of the GST Act.

The entity is an ore supplier. The entity enters into a contract to supply a certain type of ore to a purchaser (type A ore). Under the terms of the contract, the entity is required to deliver the type A ore to the port, where it is unloaded onto a common stockpile and blended with other similar ore from different suppliers.

The entity is further contracted by the purchaser to arrange the loading of the blended ore (type AB ore) onto a nominated vessel bound for overseas. Once the various ores are blended in the common stockpile, a new and specific blend of ore is created. The contract specifies that the entity is responsible for the FOB (free on board) delivery of the type AB ore to the nominated vessel. The purchaser is contracted to supply the type AB ore to an overseas buyer.

The entity and the purchaser are both registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.

Under section 38-185 of the GST Act, certain supplies of goods, for consumption outside of Australia, are GST-free. The entity's supply of type A ore is a supply of goods. As such, the GST status of the supply of the type A ore is appropriately considered under section 38-185 of the GST Act.

Item 1 in the table in subsection 38-185(1) of the GST Act (Item 1) provides that a supply of goods is GST-free if the supplier exports the goods before, or within 60 days after, the earlier of consideration being received or an invoice being issued.

Therefore, under Item 1, a supply of goods that are exported is GST-free where: • there is a supply of goods • the supplier exports the goods from Australia, and • the export occurs before or within a 60 day period (or such further period as the Commissioner allows).

The entity is contracted to supply type A ore to the purchaser by delivering the type A ore to the port. Therefore, as the entity is making a supply of goods (type A ore), the first element in Item 1 is satisfied.

Item 1 further requires that the supplier exports the goods from Australia. For the purposes of Item 1, a supplier is considered to export goods where: • the supplier is responsible for delivering the goods on board a ship or to an aircraft operator, and • that ship or aircraft operator has been engaged, either by the seller or the buyer (or by another party acting on behalf of the seller or buyer) to carry those goods to an overseas destination.

For a supply to be GST-free under Item 1, the goods supplied must be the same goods that are exported. Under the terms of the contract, the entity is responsible for the FOB delivery of the type AB ore to the nominated vessel and is required to arrange the loading of the type AB ore onto that vessel. The entity is not contracted to load its own type A ore onto the nominated vessel but rather the type AB ore. Therefore, although the entity supplies type A ore, it does not export type A ore, rather it exports the type AB ore. As such, the second element in Item 1 is not satisfied.

However, under subsection 38-185(3) of the GST Act in certain circumstances a supplier of goods is treated as having exported the goods from Australia for the purposes of Item 1. One of the requirements of subsection 38-185(3) of the GST Act is that the goods are not altered or used in any way, after being supplied to an entity for export, except to prepare them for export. The entity supplies type A ore to the purchaser. The type A ore is then blended with other ore and transformed into type AB ore. This transformation goes beyond preparation for export. Therefore the requirement in subsection 38-185(3) of the GST Act is not satisfied because the type A ore supplied to the purchaser is altered prior to being exported.

Although the entity supplies type A ore to the purchaser, the entity does not export type A ore (as per the second requirement in Item 1) nor is it treated as having exported type A ore (as per subsection 38-185(3) of the GST Act). Therefore, the entity is not making a GST-free supply under Item 1 when it is contracted to: • supply type A ore to a common stockpile where it is blended with other ore, and • load the blended ore (type AB ore) onto a vessel bound for overseas.

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 not GST-free under any other provisions in Division 38 of the GST Act nor is it input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act.