Food marketed as confectionery or ingredients for confectionery
For source of ATO view, refer to the Detailed food list.
Clause 1, Item 8 of Schedule 1 of A New Tax System (Goods and Services Tax) Act 1999 ("the Act") states that:
"confectionery, food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery"
will be subject to GST.
Paragraph 1.44 of the Further Supplementary Explanatory Memorandum to the GST Bill ("the EM") provides that Schedule 1 lists certain products that will be taxed as confectionery. This list is essentially the same as the definition of confectionery used in the wholesale sales tax (WST) legislation.
Paragraph 1.45 of the EM goes on to say:
"Confectionery includes food that is marketed as confectionery, such as chocolate, boiled sweets, lollipops, sherbet, marshmallow and fruit lollies, as well as the specific types of goods included in Schedule 1."
Where products are currently WST exempt and are not captured under Schedule 1 of the GST Act, the WST exemption will carry across to the GST legislation and the products will be GST-free.
There are a number of court cases that assist in determining whether a product is confectionery. The reasoning in Zeroz Pty Ltd v DFC of T 97 ATC 4277 and the decisions in Allied Mills Industries v FC of T 87 ATC 4387 and Candy Maid Confections v Customs & Excise Commissioners (1969) 1 Ch. 6111 lead to the conclusion that the word 'confectionery' must be given its ordinary meaning.
Candy Maid decided whether a toffee apple was confectionery. It was held in this case that toffee apples were not articles of confectionery similar to chocolates or sweets.
Aickin J in the High Court decision Landau and Anor. v Goldwater and Anor. 13 ALR 192 gave a general description of confectionery:
"one of common usage which embraces a wide variety of articles, many readily recognisable as examples of confectionery. They are primarily small articles of a sweet character containing substantial amounts of sugar and regarded as being in the nature of a delicacy in whatever quantity they may be consumed. There is, however, no doubt that in the ordinary parlance the term would now include blocks of chocolate, however small or however large."
Further to the above, in determining whether food is marketed as a "confectionery" or "ingredients for confectionery" the activities of the seller are relevant. Consideration is given to the following:
- the name of the goods;
- the price of the goods;
- the labelling on any containers for the goods;
- literature or instructions packed with the goods;
- how the goods are packaged;
- how the goods are promoted or advertised; and
- how the goods are distributed.
In determining whether food is marketed as confectionery or as an ingredient for confectionery, it is relevant to look at the uses to which the product is put.
Willy Wonka's Chocolate Factory purchases confectioner's glaze that it uses on its chocolates. Confectioner's glaze is only used by confectionery manufacturers and is therefore considered to be 'food marketed as an ingredient for confectionery' (Clause 1, Item 8 of Schedule 1).
Willy Wonka's Chocolate Factory will pay GST when they purchase confectioner's glaze and will be entitled to claim an input tax credit.
End of example
Willy Wonka's Chocolate Factory also purchases sugar that is used in the manufacture of their chocolates. Sugar is not considered to be 'food marketed as an ingredient for confectionery', although it is an ingredient used in the manufacture of confectionery. However, sugar has any number of different uses and is used as an ingredient in various foods. Sugar is therefore considered to be an 'ingredient for food for human consumption' (subsection 38-4(1)(b) of the GST Act) and will be GST-free.
End of example
Gaynor's Gourmet Delights makes and sells chocolate dessert cups that can be used to hold mousse, ice cream, fruit or a variety of other desserts. The chocolate dessert cups are made from compound or cooking chocolate. Gaynor purchases this chocolate from a supplier who is not marketing the chocolate as confectionery. The chocolate is packaged and sold in the supermarket as 'cooking chocolate' and is available in the same aisle as other cooking ingredients (for example, flour, icing sugar, slivered almonds and so forth).
The compound or cooking chocolate purchased by Gaynor is not considered to be 'food marketed as confectionery' or 'food marketed as ingredients for confectionery' (Clause 1, item 8 of Schedule 1 of the GST Act) and will be GST-free.
Similarly, the chocolate dessert cups sold by Gaynor are not considered to be 'food marketed as confectionery' and will be GST-free as 'food for human consumption' in accordance with subsection 38-4(1)(a) of the GST Act.
End of example