ATO Interpretative Decision

ATO ID 2001/391 (Withdrawn)

Goods and Services Tax

• The ATO view is covered in the 'GST food guide - Part 3 - Detailed food list'.
  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 dried fruit that has been dipped in honey?

Decision

Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells dried fruit that has been dipped in honey.

Facts

The entity is a food supplier. The entity packages and sells dried fruit that has been dipped in honey.

No other preservatives are added. The only ingredients in the product are fruit and honey. The dried fruit has not been dipped in syrup.

The dried fruit that has been dipped in honey does not have a glace or a crystallised appearance.

The dried fruit that has been dipped in honey is not similar to banana chips.

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)(a) of the GST Act to include food for human consumption (whether or not requiring processing or treatment). Dried fruit that has been dipped in honey is considered to be 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 the table in clause 1 of Schedule 1 to the GST Act (Schedule 1).

Of most relevance to this case is item 12 of Schedule 1 (Item 12), which provides that 'crystallised fruit, glace fruit and drained fruit' is not GST-free.

Therefore, the issue is whether dried fruit that has been dipped in honey is a kind of crystallised fruit, glace fruit or drained fruit.

Crystallised fruit, glace fruit and drained fruit are not defined in the GST Act.

Generally, where words are not defined in the relevant Act, they are usually interpreted in accordance with their ordinary meaning, unless they have a special or technical meaning. Where words have a special or technical meaning, it is necessary to determine their meaning by reference to the industry to which those words relate (Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222).

The words crystallised fruit, glace fruit and drained fruit have a special meaning in the Food Industry. The Food Industry considers that crystallised, glace and drained fruits are fruits that have been immersed in syrup. After immersion, they are treated differently. In the case of drained fruit, the excess syrup is drained off after immersion. Glace fruit is produced when the syrup is dried, leaving the fruit with a coating of syrup. In the case of crystallised fruit, crystals are formed on the surface or through the fruit when the syrup is dried.

In this case, the dried fruit has been dipped in honey rather than syrup. Furthermore, the fruit is neither drained, glace nor crystallised. Accordingly, the dried fruit that has been dipped in honey is not a kind of crystallised fruit, glace fruit or drained fruit.

In addition, the supply of the dried fruit that has been dipped in honey 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 the dried fruit that has been dipped in honey.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 38-2
   subsection 38-3(1)
   paragraph 38-3(1)(c)
   subsection 38-4(1)
   paragraph 38-4(1)(a)
   Schedule 1 clause 1
   Schedule 1 clause 1 table item 12

Case References:
Herbert Adams Pty Ltd v FCT
   (1932) 47 CLR 222

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

Business Line:  GST

Date of publication:  29 September 2001

ISSN: 1445-2782