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  • Issue 29

    The GST treatment of different types of chocolate

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

    The term 'chocolate'

    Although the Australia New Zealand Food Authority (ANZFA) food standards have no legislative basis for the purposes of the GST Act, it is relevant to look at what they consider to be 'chocolate'. The Australian food laws are quite specific about what can and cannot be called 'chocolate'. Chocolate is any product that is obtained from cocoa nibs, cocoa mass, cocoa, fat reduced cocoa or any combination of two or more of these ingredients, with or without extracted cocoa butter or sucrose.

    Similarly, 'chocolate' is defined in the Macquarie Concise Dictionary 3rd Edition as

    '1. a preparation of the seeds of cacao, roasted, husked and ground (without removing any of the fat), often sweetened and flavoured, as with vanilla. 2. a beverage or confection made from this. 3. dark brown. 4. made or flavoured with chocolate. 5. having the colour of chocolate.'

    Therefore it can be determined that 'chocolate' is more than confectionery. Chocolate is used as an ingredient in many other products, as well as in confectionery - for example, cocoa is considered to be chocolate and is used in a variety of products (both taxable for example,. cakes, biscuits, muffins and GST-free for example,. drinking chocolate or chocolate topping etc).

    Different types of chocolate

    Chocolate liquor

    The base substance of all real chocolate and cocoa products. It comes from the ground nibs.

    Unsweetened chocolate (or baking or cooking chocolate)

    Chocolate liquor that has been cooled and moulded into squares.

    Semisweet chocolate or dark chocolate

    A blend of chocolate liquor, added sugar, and cocoa butter. A vegetable fat extracted from chocolate liquor. It is available in bars, squares and baking chips. The chips are also called bits or morsels and are specially made to hold their shape when baked.

    Sweet chocolate

    A combination of chocolate liquor, sugar, a bit of vanilla and cocoa butter. It contains more sugar than does semisweet chocolate. It usually comes in bars and is good for baking and eating.

    Bittersweet chocolate

    A sub-category of sweet chocolate. Ranges in degrees of sweetness. It contains chocolate liquor, milk, extra cocoa butter (to make it melt easily for baking) and sugar.

    Unsweetened cocoa

    What remains after cocoa butter has been removed from the chocolate liquor, creating a fine powder. Naturally low in fat and sodium. It has no additives or preservatives.

    Milk chocolate

    The most common type of chocolate. It contains chocolate liquor, cocoa butter, milk or cream, sugar and flavourings. Milk chocolate contains at least 10% chocolate.

    Compound chocolate

    Made with fats other than cocoa butter. They look a lot like chocolate, their taste is similar to chocolate, but they don't necessarily feel or act like chocolate. They may not have the shine of real chocolate or melt in your mouth. You may have to chew them. They may also be referred to as 'compound coatings' or 'summer coatings'. They are simpler to use than real chocolate in candy making. Instead of having to temper them, as you do real chocolate, you can use them as a coating by simply melting.

    White chocolate

    Not actually chocolate because it contains no chocolate liquor, which gives chocolate its colour and flavour. It may be made with vegetable fats, colourings and flavourings.

    Decorator's chocolate or confectioner's chocolate



    Not really chocolate, but a sort of chocolate flavoured candy used for things such as covering strawberries. It is created to melt easily and harden quickly, but it is not chocolate.

    'Couverture' is French for 'covering'. A special kind of chocolate that has more cocoa butter than regular chocolate - anywhere from 33% to 38% for a really good brand. This type of chocolate is used as a coating for things like truffles. There are two ways of coating candies, by hand dipping into melted chocolate or enrobing, gently pouring chocolate over the treat.

    The GST legislation

    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 to include:

    '(a) food for human consumption (whether or not requiring further processing or treatment);
    (b) ingredients for food for human consumption;
    (c) beverages for human consumption;
    (d) ingredients for beverages for human consumption;
    (e) goods to be mixed with or added to food for human consumption...'

    Section 38-3 of the GST Act identifies supplies of food that are not GST-free. Included in this section are foods specified in clause 1 of Schedule 1 of the GST Act. Clause 1, item 8 of Schedule 1 of the GST 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.

    Each of these needs to be considered, in turn, to establish what chocolate will be subject to GST.

    What is 'confectionery'?

    As discussed above, not all 'chocolate' will be confectionery. Therefore, what do we mean by the term 'confectionery'? This question has been addressed in Issue No. 12 (Food marketed as confectionery or ingredients for confectionery).

    For the purposes of the GST Act it can be determined that when we refer to chocolate under item 8 of Schedule 1 of the GST Act, that we are considering blocks of chocolate, Easter for eggs, chocolate coated confectionery in bars etc that are considered to be a delicacy or a treat.

    To assist in determining whether a chocolate product is confectionery it is relevant to consider the activities of the seller and consideration should be 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 goods
    • how the goods are packaged
    • how the goods are promoted or advertised; and
    • how the goods are distributed.

    Can it therefore be concluded that cooking chocolate is confectionery? Generally, the answer to this is no. Cooking/baking chocolate contains different ingredients to chocolate confectionery. Cooking/baking chocolate is often made to hold its shape when baked (for example, the chocolate chips used in chocolate chip cookies or muffins).

    However, some, but not all, cooking/baking chocolate may fail a marketing test. Two marketing tests exist in item 8 of Schedule 1 of the GST Act - food marketed as confectionery and food marketed as ingredients for confectionery.

    Food marketed as confectionery

    As stated above, confectionery is something that is considered to be a treat or delicacy. Cooking/baking chocolate does not fit into this category. Often it is bitter and unpleasant to eat on its own. It is often found in the ingredient aisle of the supermarket, not with chocolate confectionery in the confectionery aisle.

    However, compound chocolate that is sold as confectionery (for example, Easter for eggs) will be subject to GST.

    Food marketed as ingredients for confectionery

    Some cooking or baking chocolate will be caught as 'food marketed as ingredients for confectionery'. Some products on the market, although available in the ingredient aisle of the supermarket, contain recipes etc on the packaging. Often these recipes will be for confectionery. Others may contain a couple of different recipes, for example - how to make chocolates and a recipe for chocolate chip cookies. In both instances, the ATO will conclude that the products are marketed as an ingredient for confectionery.

    Where cooking chocolate or baking bits are packaged in clear bags with no statements as to their intended use, and are found in the ingredients aisle of the supermarket, it is accepted that they are marketed as an ingredient for food for human consumption and are therefore GST-free.

    However the same product is often sold at craft stores and markets. In these instances the cooking chocolate/baking bits are often sitting next to chocolate moulds and fondue that is used to make chocolates and other confectionery. It is therefore difficult to argue that it is being marketed for a purpose other than to make confectionery. Therefore item 8 of Schedule 1 of the GST Act would apply to subject this product, in this instance, to GST.

    The application of a marketing test can and will result in different treatments of the same product. This is unavoidable.

    Example 1

    BSJ Confectionery Supplies are the suppliers of chocolates and chocolate fillings, food colourings, etc. to Jo Jo's Crafts and to the supermarkets. These products are marketed on a general basis and not marketed specifically as an ingredient for confectionery manufacture. The supply of these products by BSJ's will not be subject to GST.

    End of example


    Example 2

    Jo Jo's Crafts, a specialised craft store sells chocolate moulds, fillings for handmade chocolates, food colourings and chocolate for handmade chocolates. All these items sit alongside each other on the shelves. These goods (excluding the chocolate moulds) are promoted and distributed specifically as ingredients for confectionery and therefore subject to GST by virtue of item 8 of Schedule 1 of the GST Act. The chocolate moulds are taxable, as they are not food.

    End of example


    Example 3

    A supermarket sells cooking chocolate in clear cellophane bags, labelled 'Cooking Chocolate'. This product is available in the same aisle as other cooking ingredients (for example, flour, icing sugar, slivered almonds, etc.). The cooking chocolate has a variety of confectionery and non-confectionery applications and there are no suggested uses included on the packaging. This product is not considered to be food marketed as an ingredient for confectionery and will be GST-free as an ingredient for food for human consumption.

    End of example

    Food consisting principally of confectionery

    When referring to 'food consisting principally of confectionery', reference is made to food items that contain confectionery. These are not foods that may be considered to be confectionery in their own right. An example of food consisting principally of confectionery would be frogs in a pond, where there are several chocolate frogs surrounded by jelly. A further example might be chocolate-coated strawberries, where the chocolate coating is thick enough that the strawberry loses its identity.

    Classification of different chocolate products

    Therefore, based on the above, it may be possible to classify the different 'chocolate' products as follows


    GST Classification

    Chocolate liquor

    Ingredient for food for human consumption - paragraph 38-4(1)(b) (GST-free)

    Dark chocolate confectionery

    Confectionery - item 8 of Schedule 1 (subject to GST)

    Milk chocolate confectionery

    Confectionery - item 8 of Schedule 1 (subject to GST)

    White chocolate confectionery

    Confectionery - item 8 of Schedule 1 (subject to GST)

    Compound chocolate

    Compound chocolate confectionery

    Ingredient for food for human consumption - paragraph 38-4(1)(b) (GST-free)2

    Confectionery - item 8 of Schedule 1 (subject to GST). This may include Easter for eggs etc


    Food marketed as confectionery - item 8 of Schedule 1 (subject to GST)

    Decorator's chocolate or confectioner's chocolate



    Ingredient for food for human consumption - paragraph 38-4(1)(b) (GST-free)2

    Cooking/Baking Chocolate

    Ingredient for food for human consumption - paragraph 38-4(1)(b) (GST-free)2


    Ingredient for food for human consumption - paragraph 38-4(1)(b) (GST-free)


    Ingredient for a beverage for human consumption - paragraph 38-4(1)(d) (GST-free)

    2 However, these will be subject to GST where they are marketed as an ingredient for confectionery.

    If you are uncertain about the classification of a chocolate product please contact the ATO:

      Last modified: 01 Apr 2019QC 16451