ATO Interpretative Decision
ATO ID 2001/501
Goods and Services Tax
GST and fruit jubesFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it supplies fruit jubes?
Decision
No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies fruit jubes. The entity is making a taxable supply under section 9-5 of the GST Act.
Facts
The entity is a food supplier. The entity is supplying fruit jubes.
Fruit jubes are a fruit, jube-like, snack product formed by combining concentrated fruit juice with glucose, sugar, gelatine and natural colour and flavour. The fruit juice content (rehydrated equivalent) of the product is over 95%. The product contains a substantial amount of sugar.
The marketing describes the product as a convenient and delicious snack or treat.
The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.
Reasons for Decision
A supply of food is GST-free under section 38-2 of the GST Act provided that it does not come within any of the exclusions listed in section 38-3 of the GST Act.
Section 38-4 of the GST Act provides the meaning of food. Under paragraph 38-4(1)(a) of the GST Act food includes 'food for human consumption'. Fruit jubes are food for human consumption.
However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1).
Item 8 of Schedule 1 (Item 8) lists confectionery, food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery.
The term 'confectionery' is not defined in the GST Act and therefore must be given its ordinary meaning. 'Confectionery' is defined in The Macquarie Dictionary (1997) as 'confections or sweets collectively'. 'Confection' is defined, amongst other things, as 'a sweet preparation (liquid or dry) of fruit or the like...'.
Furthermore, Aickin J in the High Court decision Landau and Anor v. Goldwater and Anor (1976) 13 ALR 192 gave the following general description of the term '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 ... '.
Fruit Jubes are small articles of a sweet character containing substantial amounts of sugar. Furthermore, as the product is marketed as a delicious and convenient snack or treat, fruit jubes are regarded as being in the nature of a delicacy. Accordingly, fruit jubes are considered to be confectionery and are covered by Item 8. Therefore, the supply of the fruit jubes is excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.
The entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies fruit jubes.
Date of decision: 7 September 2001
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
Division 38
section 38-2
section 38-3
paragraph 38-3(1)(c)
paragraph 38-4(1)(a)
Division 40
Schedule 1 clause 1
Schedule 1 clause 1 table item 8
Case References:
Landau and Anor. v Goldwater and Anor
(1976) 13 ALR 192
Keywords
Goods & services tax
GST food
Food for human consumption
GST supplies & acquisitions
Taxable supply
ISSN: 1445-2782