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ATO Interpretative Decision

ATO ID 2001/396

Goods and Services Tax

GST and malt extract
FOI status: may be released

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CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 sells malt extract to be used in the production of bread and biscuits?

Decision

Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells malt extract to be used in the production of bread and biscuits.

Facts

The entity is a food supplier that sells malt extract in bulk. In this case, the entity supplies malt extract as an ingredient to be used in the production of bread and biscuits.

The entity is registered for goods and services tax (GST).

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.

Food is defined in paragraph 38-4(1)(b) of the GST Act to include ingredients for food for human consumption. As the malt extract supplied by the entity is used in the production of bread and biscuits, it is an ingredient for food for human consumption, and therefore is food for the purposes of the GST Act.

However, under paragraph 38-3(1)(c) of the GST Act, the supply of food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1), or food that is a combination of one or more foods, at least one of which is of a kind specified in Schedule 1, is not GST-free.

Malt extract is not food of a kind specified in Schedule 1, nor is it food that is a combination of one or more foods, at least one of which is of a kind specified in Schedule 1. As such, malt extract is not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. Furthermore, none of the other exclusions in section 38-3 of the GST Act apply to the supply of the malt extract to be used in the production of bread and biscuits.

The supply of the malt extract, as a product to be used in the production of bread and biscuits, is therefore GST-free under section 38-2 of the GST Act.

[Note: Malt extract can be used for other purposes, such as an ingredient for confectionery, for brewing alcoholic and non-alcoholic drinks, and as an ingredient for powdered drink products.
However, it is the ATO view that the supplier determines what the product is being supplied as. For example, where the malt extract is supplied as an ingredient for confectionery, the supply is not GST-free (as item 8 of Schedule 1 lists food marketed as ingredients for confectionery). Whereas, if the malt extract is supplied as a GST-free ingredient for bread and biscuits but is subsequently used by the purchaser as an ingredient for confectionery, the supply to the purchaser remains GST-free].

Date of decision:  7 August 2001

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 38-2
   section 38-3
   paragraph 38-3(1)(c)
   paragraph 38-4(1)(b)
   Schedule 1 clause 1
   Schedule 1 clause 1 table item 8

Keywords
Goods & services tax
GST-free
GST food
Ingredients for food

Business Line:  GST

Date of publication:  29 September 2001

ISSN: 1445-2782

history
  Date: Version:
You are here 7 August 2001 Original statement
  13 September 2005 Archived

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