ATO Interpretative Decision
ATO ID 2002/18 (Withdrawn)
Goods and Services Tax
GST and banana chipsFOI status: may be released
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This ATO ID is withdrawn and is replaced by ATO ID 2003/1142This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision Withdrawn 19 December 2003
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 banana chips?
Decision
No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies banana chips. The entity is making a taxable supply under section 9-5 of the GST Act.
Facts
The entity is a food supplier. The entity supplies banana chips.
The banana chips are usually made from some or all of the following ingredients: banana, sugar, honey, coconut, oil and banana flavour.
Generally, the banana chips are made by peeling and slicing green bananas and then soaking them in a brine made of sulphur dioxide. This is designed to clean the fruit and to preserve the colour. The fruit is then placed into a syrup made of dextrose mono hydrone (sugar) which makes the fruit crispy. Sometimes honey is added to the chips at this stage. Sometimes the chips are also fried. Finally, the banana chips are dehydrated by drying them in the air.
Banana chips are manufactured in a way that greatly increases the sugar content of the fruit and changes the characteristics of the fruit.
Banana chips are not similar to fruit products generally classed as 'dried fruit' (that is, fruit which is dried or semi-dried with little if any additional additives).
Banana chips are generally not marketed as confectionery or ingredients for confectionery.
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.
Food is defined in subsection 38-4(1) of the GST Act. Under paragraph 38-4(1)(a) of the GST Act, food includes food for human consumption (whether or not requiring processing or treatment). Banana chips 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 clause 1 of Schedule 1 to the GST Act (Schedule 1). The item that is relevant to this case is item 8 of Schedule 1 (Item 8).
Item 8 lists confectionery, food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery. Banana chips are generally not marketed as confectionery or ingredients for confectionery. Therefore, the issue is whether or not banana chips are 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 '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.'
Banana chips are manufactured in a way that greatly increases the sugar content of the fruit and changes the characteristics of the fruit. Banana chips are not similar to fruit products generally classed as 'dried fruit' (that is, fruit which is dried or semi-dried with little if any additional additives).
It is considered that banana chips are primarily small articles of a sweet character containing substantial amounts of sugar and are considered to meet the definition of confectionery. Therefore, the supply of the banana chips 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 banana chips.
Date of decision: 13 November 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)
subsection 38-4(1)
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
Other References:
The Macquarie Dictionary (1997)
Keywords
Goods & services tax
GST free
GST food
Food for human consumption
GST supplies & acquisitions
Taxable supply
ISSN: 1445-2782
| Date: | Version: | |
| 13 November 2001 | Original statement | |
| You are here → | 19 December 2003 | Archived |