ATO Interpretative Decision

ATO ID 2001/367 (Withdrawn)

Goods and Services Tax

GST and food processing and packaging services
FOI status: may be released

This ATO ID is a straight application of the law and does not contain an interpretative decision.

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

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 supplier of processing and packaging services, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a processing and packaging service in relation to a food that is GST-free?

Decision

Yes, the entity is making a taxable supply under section 9-5 of the GST Act, when it supplies a food processing and packaging service in relation to a food that is GST-free.

Facts

The entity supplies a food processing and packaging service in relation to a food that is GST-free. This service is carried out in Australia. The entity does not purchase or own the food. Once the entity processes and packages the food, the entity either gives the processed food back to its clients or the entity exports the food on behalf of the clients. The entity receives consideration in return for supplying the food processing and packaging service.

The entity is registered for goods and services tax (GST) and supplies the food processing and packaging service in the course of its enterprise.

Reasons for Decision

Under section 9-5 of the GST Act, an entity makes a taxable supply if:

•: it makes a supply for consideration;
•: it makes the supply in the course or furtherance of an enterprise that the entity is carrying on;
•: the supply is connected with Australia; and
•: the entity is registered or required to be registered.

However, a supply is not a taxable supply to the extent that it is GST-free or input taxed.

The entity is registered for GST and supplies the food processing and packaging service in the course of its enterprise. The entity supplies the service in Australia and the entity receives consideration in return for this service. As such, the supply satisfies the positive requirements of section 9-5 of the GST Act.

Subsection 38-6(1) of the GST Act states that 'A supply of the packaging in which food is supplied is GST-free if the supply of the food is GST-free'. This subsection of the GST Act applies to make packaging GST-free, only when GST-free food is supplied with the packaging. This subsection does not apply, however, in circumstances where the service of processing and packaging food is identifiable as a separate supply, for example, when the service is provided by an entity that does not supply the food.

In this instance, the entity does not supply the food, but is merely supplying the service of processing and packaging, before returning the processed food back to a client or exporting it on behalf of a client. Therefore, the supply of processing and packaging is a separate supply of a service only and is not GST-free under subsection 38-6(1) of the GST Act.

Furthermore, the supply is neither GST-free under any other section of Division 38 of the GST Act nor is it 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 provides a food processing and packaging service.

Date of decision: 3 July 2001

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   Division 38
   subsection 38-6(1)
   Division 40

Related Public Rulings (including Determinations)
GSTD 2000/6

Keywords
Goods and services tax
GST free
GST food
Packaging of food
GST supplies & acquisitions
Taxable supply

Business Line: GST

Date of publication: 29 September 2001

ISSN: 1445-2782

history

	Date:	Version:
	3 July 2001	Original statement
You are here	2 September 2005	Archived

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