2.b.6 A practitioner has been advised by a herbal company that the raw herbs she uses are really foods just like nuts and are GST-free. Raw herbs are described as herbs that have not been processed in a factory but have usually been dried. They may consist of leaves, bark, twigs, roots, flowers, seeds, fruit. Some commonly used medicinal herbs include ginger, cinnamon, cardamom, turmeric, licorice. In the case of Chinese herbal medicines it can also extend to some minerals such as calcium based products (for example ground oyster shell) and animal products.
Will raw herbs be considered as food and treated as GST-free, or recognised as herbal medicines and attract the GST?
Non-interpretative – straight application of the law.
Raw herbs supplied by a medical practitioner or a recognised professional may be GST-free pursuant to sections 38-7(3), 38-10(3) or 38-10(4) as being goods supplied in the course of a GST-free medical service or other health service. For the necessary requirements of those sections, see Issues 1.c., 2.b. and 2.c.
As to the applicability of the Food provisions in Subdivision 38-A, a significant issue is that raw herbs which are supplied as part of a herbal formula/prescription are not GST-free under the food provisions. The reason for this is that the character of the individual items have changed character once mixed.
It remains then to consider whether the supply of raw herbs separately as a food, will be GST-free under the Food provisions.
Raw herbs will be GST-free as food where the requirements of section 38-2 of the GST Act are satisfied. Where raw herbs do not satisfy the requirements of section 38-2, they will not generally be GST-free.
Section 38-2 states:
‘A supply of *food is GST-free.’
‘Food’ is defined in section 38-4 as being any one, or a combination of, the following:
- food for human consumption (whether or not requiring processing or treatment)
- ingredients for food for human consumption
- *beverages for human consumption
- ingredients for beverages for human consumption
- goods to be mixed with or added to food for human consumption (including condiments, spices, seasonings, sweetening agents or flavourings)
- fats and oils marketed for culinary purposes
but does not include:
- live animals (other than crustaceans or molluscs)
ga. unprocessed cow's milk
- any grain, cereal or sugar cane that has not been subject to any process or treatment resulting in an alteration of its form, nature or condition, or
- plants under cultivation that can be consumed (without being subject to further process or treatment) as food for human consumption.
Separately supplied raw herbs may be GST-free as food, provided the herbs are not supplied in the form of a living plant. They are possibly GST-free as food as either:
- food for human consumption
- ingredients for food for human consumption, or
- goods to be mixed with or added to food for human consumption.
Food is not further defined and will take on its ordinary meaning. The Macquarie dictionary defines ‘food’ as:
‘what is eaten, or taken into the body, for nourishment’.
The courts, in determining whether a particular good is food, will look to what an ordinary person understands food to be. It is considered that a good will generally be food where it has the normal characteristics of food in that it looks like food, tastes like food and fills the stomach like food.
Many of the goods mentioned in the question, such as ground oyster shell and many leaves, bark, twigs, roots, flowers and seeds, do not have the normal characteristics of food and will not be food and would not generally be considered to be ingredients of food.
It should be noted that ‘goods to be mixed with or added to food’ whilst only including spices, condiments, seasonings also may include commercial additives such as chemicals that are used only for food purposes.
Some of the things listed in the question would satisfy the definition. This includes ginger, cinnamon, cardamom, turmeric and licorice. Generally, these are all either ingredients or they satisfy ‘goods to be mixed with or added to food’. However, it will be necessary for the goods to be in a form that will satisfy the requirements. For example, goods in tablet or capsule form or goods which have been added to other goods such that they lose their identity as ‘food’ will not satisfy the requirements. Also as stated above if provided as part of a herbal formula/prescription the raw herbs will not be GST-free under the Food provisions.