ATO Interpretative Decision

ATO ID 2001/214

Goods and Services Tax

• This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the entity, a supplier of pest control products, 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 fruit fly lure?

Decision

No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells fruit fly lure. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts

The entity is a supplier of pest control products. The entity sells fruit fly lure to farmers who mix it with a herbicide to spray on crops to assist in the control of fruit flies. The fruit fly lure is a food grade yeast extract. The fruit fly lure is not being sold as food; rather it is designated as something other than food.

The entity is registered for goods and services tax (GST). The supply meets the other positive limbs of section 9-5 of the GST Act.

Reasons For Decision

Under section 38-2 of the GST Act a supply of food is GST-free. Food is defined in subsection 38-4(1) of the GST Act. Of most relevance to this case is paragraph 38-4(1)(b) of the GST Act, which defines food to include ingredients for food for human consumption. Fruit fly lure is a food grade yeast extract. Food grade yeast extract is an ingredient for food for human consumption. However, food grade yeast extract can be used for both food and non-food applications.

Therefore, it is considered that, if a supplier differentiates a product to be supplied as food, from a product to be supplied for industrial or other non-food uses, the latter supply is not considered to be a GST-free supply of food under section 38-2 of the GST Act.

Some of the ways in which a dual-purpose food product are considered to be differentiated for a non-food use are:

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designation as something other than food;

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storage in conditions or containers that are unsuitable for food;

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labelling, invoicing or marketing as a non-food product; or

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delivery in a manner unsuitable for food.

In this case, the entity sells the food grade yeast extract to farmers as a fruit fly lure to assist in the control of fruit flies. It is not being sold as food; rather it is designated as something other than food. As such, the fruit fly lure is not an ingredient for food for human consumption and therefore does not amount to food for the purposes of subsection 38-4(1) of the GST Act. Accordingly, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells the fruit fly lure.

The entity is registered for GST and the supply satisfies 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.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   Division 38
   section 38-2
   subsection 38-4(1)
   paragraph 38-4(1)(b)
   Division 40

Other References:
Food Industry Issues Register - Issue No.1

Keywords
Goods & services tax
GST free
GST food
Food for human consumption
Ingredients for food

Business Line:  GST

Date of publication:  16 August 2001

ISSN: 1445-2782