• Issue 33

    What is the GST treatment of Whey Protein Products (formulated supplementary sports food or dietary supplement)

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

    A supply of food is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded by section 38-3 of the GST Act.

    Food is defined in section section 38-4 of the GST Act to include ingredients for beverages for human consumption (paragraph 38-4(1)(d) of the GST Act). Whey protein products are generally mixed with milk, water or other liquids and then consumed. Therefore, the whey protein products satisfy the definition of food contained in paragraph 38-4(1)(d) of the GST Act.

    However, under paragraph 38-3(1)(d) of the GST Act, beverages (or ingredients for beverages) are only GST-free if they are specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2).

    Whey protein products are not specifically listed in Schedule 2 . Therefore, it is necessary to determine whether whey protein products are ingredients that are of a kind specified in Schedule 2.

    The items in Schedule 2 that are of relevance are:

    • Item 1(c) 'whey, whey powder or whey paste'
    • Item 9 'dry preparations marketed for the purpose of flavouring milk'

    In relation to item 1(c) in Schedule 2, the terms 'whey', 'whey powder' and 'whey paste' are not defined in the GST Act. Therefore, it is necessary to examine the ordinary meanings of those words.

    The Macquarie Dictionary (1997) defines 'whey' as 'milk serum, separating as a watery liquid from the curd after coagulation, as in cheese making'. Accordingly, 'whey powder' and 'whey paste' are taken to be the powdered and paste versions of this substance.

    The products in question are described as 'whey protein powder'. Therefore, it is necessary to determine whether 'whey protein powder' has the same meaning as 'whey powder'.

    'Whey powder' is produced after whey is concentrated (by means of reverse osmosis or evaporation) and dried (by means of spray or roller). However, to produce 'whey protein powder', whey must be submitted to a far more complex process in order to isolate and extract the protein from the whey. The whey must undergo precipitation by polyelectrolytes, centrifugation or filtration, separation of precipitation reagents, concentration by evaporation, and spray drying.

    'Whey powder' is a complete whey product whereas 'whey protein powder' is one derivative of whey. Therefore, although both products come from the same source (whey), they are produced differently and ultimately possess different characteristics. Accordingly, the 'whey protein powder' is not an ingredient 'of a kind' listed in Item 1(c).

    In relation to item 9 of Schedule 2, it is necessary to determine whether whey protein powder products are dry preparations marketed for the purpose of flavouring milk. Although whey protein powder products contain flavouring, they are not marketed for the purpose of flavouring milk; rather, they are marketed as muscle and strength building products. As such, the whey protein powder products are not covered by Item 9.

    Although whey protein powder products are ingredients for beverages, they are not ingredients of a kind specified in Schedule 2. Therefore, supplies of these products are not GST-free supplies under section 38-2 of the GST Act and are subject to GST.

      Last modified: 05 Aug 2016QC 16451