ATO Interpretative Decision
ATO ID 2001/560
Goods and Services Tax
GST and supply of brood prawnsFOI status: may be released
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 brood prawns, making a GST-free supply under section 38-2 of the A New Tax System (Goods & Services Tax) Act 1999 (GST Act), when it sells brood prawns to produce hatchlings (larvae)?
Decision
No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells brood prawns to produce hatchlings (larvae). The entity is making a taxable supply under section 9-5 of the GST Act.
Facts
The entity is a supplier of brood prawns.
The entity supplies brood prawns to a prawn hatchery.
The prawn hatchery then uses the brood prawns to produce hatchlings (larvae).
The entity is registered for 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. Paragraph 38-4(1)(a) lists food for human consumption (whether or not requiring further processing or treatment). However, paragraph 38-4(1)(g) of the GST Act provides that the definition of food does not include live animals (other than crustaceans or molluscs).
Brood prawns are live animals, but as brood prawns are crustaceans they are not excluded by paragraph 38-4(1)(g) of the GST Act from being food as defined in the GST Act.
However, in order to be considered food according to the definition in the GST Act, brood prawns must be supplied as food for human consumption (whether or not requiring further processing or treatment).
In this case, brood prawns are supplied to produce hatchlings (larvae), rather than as food for human consumption. Therefore, the supply is not a GST-free supply of food under section 38-2 of the GST Act.
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 when it sells brood prawns to produce hatchlings (larvae).
Date of decision: 1 October 2001
Legislative References:
A New Tax System (Goods & Services Tax) Act 1999
section 9-5
Division 38
section 38-2
section 38-3
subsection 38-4(1)
paragraph 38-4(1)(a)
paragraph 38-4(1)(g)
Division 40
ATO ID 2001/561
Keywords
Goods & services tax
GST free
GST food
Food for human consumption
Live animals
GST primary production
GST fishing
Taxable supply
ISSN: 1445-2782
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