ATO Interpretative Decision

ATO ID 2004/539 (Withdrawn)

Goods and Services Tax

• The ATO view for this issue is covered in Goods and Service Tax Determination GSTD 2024/1 Goods and services tax: supplies of combination food.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

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 a blended seed and nut product?

Decision

Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells a blended seed and nut product.

Facts

The entity is a food supplier. The entity sells a blended seed and nut product. The product is designed to be added to breakfast cereal.

The blended seed and nut product contains a variety of seeds with the addition of a small proportion of finely ground nuts. The seeds are cleaned and polished but otherwise unprocessed. The nuts are roasted, finely ground and incorporated as ingredients into the seed and nut blend.

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 if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act.

Food is defined in section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act). The blended seed and nut product is food for human consumption and therefore, satisfies the definition of food in paragraph 38-4(1)(a) of the GST Act.

However, paragraph 38-3(1)(c) of the GST Act provides that food is not GST-free if it is 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 food of such a kind.

Item 16 of Schedule 1 (Item 16) specifies seeds or nuts that have been processed or treated by salting, spicing, smoking or roasting, or in any other similar way.

The blended seed and nut product contains a variety of seeds with the addition of a small proportion of finely ground nuts. The seeds are cleaned and polished but otherwise unprocessed and therefore are not covered by Item 16. Although, the nuts are roasted, and therefore appear to be covered by Item 16, they have been finely ground and incorporated as an ingredient in the seed and nut product. The nuts have been processed to such a degree that they no longer retain a separate identity and have been incorporated as ingredients into the seed and nut blend. The product is not a food product that combines a taxable food and a GST-free food as distinct items. Therefore, the blended seed and nut product is not covered by the excluding provisions of paragraph 38-3(1)(c) of the GST Act.

In addition, the supply of the blended seed and nut product does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells a blended seed and nut product.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 38-2
   section 38-3
   paragraph 38-3(1)(c)
   section 38-4
   section 38-4(1)(a)
   Schedule 1 clause 1
   Schedule 1 clause 1 table item 16

Keywords
Good and services tax
GST free
GST food
Food for human consumption

Siebel/TDMS Reference Number:  3680074

Business Line:  Indirect Tax

Date of publication:  2 July 2004

ISSN: 1445-2782