Food packaging

Packaging products are generally subject to GST when they are purchased. However, you can claim a GST credit for any GST included in the price of packaging for your business.

When packaging is supplied with or around food and it is normal and necessary for the sale of the food, the GST treatment of the packaging is usually the same as the GST treatment of the food (that is, the packaging around GST-free food is also GST-free).

Example: Packaging

Richard is a breakfast cereal manufacturer. He buys 50,000 cardboard boxes from a paper manufacturer for $22,000, including $2,000 GST. The sale is subject to GST as the boxes do not contain any food. Packaging is not packaging for food until it contains, and is sold with, food.

Richard then packs breakfast cereal in the cardboard boxes and sells boxes of breakfast cereal to a retailer for $100,000. The sale of the breakfast cereal is GST-free. The packaging (cardboard box) is also GST-free as it contains the breakfast cereal and is considered normal and necessary packaging for food.

If Richard packs the cereal in re-useable plastic containers, the containers are taxable, as they are not considered normal and necessary packaging for the breakfast cereal.

End of example

Normal and necessary packaging

Paper and plastic bags you supply free of charge to the customer for groceries are not subject to GST.

Containers, spoons, straws or similar objects that are usually sold separately, rather than being packaged with the food, are not considered normal and necessary packaging. Even though these items are a separate sale, they are often provided free of charge (for example, straws supplied separately with bottled water). These items are not subject to GST if they:

  • are provided free to help purchasers prepare or consume the food
  • have no lasting value (for example, they are disposable).

Packaging that is not ordinarily considered normal and necessary, will be considered to be normal and necessary (and, therefore, GST-free) when the packaging of GST-free food is:

  • not charged at a separate price, and
  • the cost price of the packaging is the lessor of:
    • $3 excluding GST, or
    • 20% of the wholesale value of the total sale.

Packaging that is more than what is considered normal and necessary for the sale of the food, is taxable. For example, if you supply breakfast cereal in a re-useable plastic container, the container is taxable. The sale would be:

  • partly taxable (container)
  • partly GST-free (cereal).

Special promotional food packaging (for example, a rack for spices) is not normal and necessary. Promotional items that accompany the food and packaging are also not normal and necessary (for example, drink containers and recipe books of lasting value). You must work out separately the tax on:

  • promotional items accompanying the food
  • packaging and items that are usually supplied separately.

Find out more

GSTD 2000/6External Link Goods and services tax: when is the supply of food packaging GST-free in terms of section 38-6 of the A New Tax System (Goods and Services Tax) Act 1999?

End of find out more
    Last modified: 05 Aug 2016QC 16413