GST issues registers

Food industry partnership

Issue 18 – Is psyllium considered to be food for the purposes of the GST Act?

For source of ATO view, refer to the Detailed food list.

Section 38-2 of the GST Act states that a supply of food is GST-free. 'Food' is defined in subsection 38-4(1) of the GST Act and includes:

'(a)

food for human consumption (whether or not requiring further processing or treatment);…

(d)

ingredients for beverages for human consumption;

(e)

goods to be mixed with or added to food for human consumption (including condiments, spices, seasonings, sweetening agents or flavourings);…'

In order to determine the correct classification of psyllium seed husks, it is first necessary to consider whether they satisfy the definition of food contained in subsection 38-4(1) of the GST Act. The relevant paragraph to consider is paragraph 38-4(1)(a) - 'food for human consumption (whether or not requiring further processing or treatment)'.

Although 'food', as referred to in subsection 38-4(1), is not further defined in the GST Act, it will be taken to have its ordinary meaning. The Macquarie Dictionary 3rd Edition ('the dictionary') defines 'food' as:

'1. what is eaten, or taken into the body for nourishment…'

However, not all substances that provide nourishment will satisfy the definition of food in the GST Act.

The Official American Nutraceutical Association Guide titled 'Nutraceuticals - The Complete Encyclopedia of Supplements, Herbs, Vitamins and Healing Foods' provides information on psyllium:

'Psyllium seed is one of the most popular bulk-producing laxatives. As a supplement or laxative, it is made of the cleaned, dried ripe seed of the Plantago psyllium plant, which is grown mainly in India. The outer covering or husk of the seeds contains a thick, gel-like material-soluble fiber- that is not digested by humans. When this soluble fiber comes in contact with water, it swells, providing both bulk and lubrication to the mass of food as it moves through the intestinal tract.'

The guide also states that psyllium seeds assist in the prevention and treatment of constipation as well as reducing blood cholesterol levels. However, the dosage should not exceed 30gm of psyllium per day.

A survey of psyllium seed husks available on the market indicates that they are commonly taken by mixing with water, juice or yoghurt, or by adding to breakfast cereal.

In the UK the Tribunal considered the meaning of food in Brewhurst Health Food Supplies [1993] BVC 610. In this case the issue was whether fruit cubes, containing a mixture of dried fruits were zero-rated for Value Added Tax purposes as food of a kind used for human consumption.

The appellant argued that the fruit cube was food of a kind used for human consumption because it had the essential characteristics of food in that it looked, tasted, smelled and felt like food.

The Commissioners ruled that the fruit cubes were not food, but a remedial preparation to counteract the effects of constipation so that the product was liable to VAT at the standard rate. The product in question was not food of a kind used for human consumption. Its bulk forming qualities provided a laxative effect. The nutritive value of the fruit cube was of marginal significance, and this pointed to it being something other than food.

It is considered that the essential character of psyllium seed husks is not that of a food but that of a supplement or laxative. Therefore, for GST purposes, psyllium seed husks are not considered to be food for human consumption under paragraph 38-4(1)(a) of the GST Act. As only 'food' as defined in subsection 38-4(1) is GST-free, and psyllium seed husks fail to satisfy this definition, they will be subject to GST.

Alternative view

Alternatively, it needs to be determined whether psyllium seed husks are an ingredient for a beverage in accordance with paragraph 38-4(1)(d) of the GST Act. Examination of psyllium seed husks available on the market indicates that they are consumed by mixing in water, juice or milk, however, they are not ingredients for those beverages. The beverages to which the psyllium seed husks are added are the means by which they are to be taken and they are not considered to be an ingredient for the beverage itself. As such, they are not an ingredient for a beverage for the purposes of the GST Act. Therefore psyllium seed husks fail to satisfy the definition of food in subsection 38-4(1) and will be subject to GST.

Another view to consider is whether psyllium seed husks satisfy paragraph 38-4(1)(e) of the GST Act as a good to be mixed with or added to food for human consumption (including condiments, spices, seasonings, sweetening agents and flavourings) . Products that satisfy this paragraph are for the purpose of adding to the taste or flavour of food, as indicated by the scope of the words in the brackets. However, psyllium seed husks are mixed with or added to food in order that they can be ingested. They are not mixed with or added to food for the purpose of enhancing its taste or flavour. The mere fact that psyllium seed husks can be added to food is insufficient for them to qualify as food under paragraph 38-4(1)(e) of the GST Act. Therefore psyllium seed husks fail to satisfy the definition of food in subsection 38-4(1) and will be subject to GST.

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