ATO Interpretative Decision

ATO ID 2002/981

Goods and Services Tax

GST and ice cream mix
FOI 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 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 ice cream mix?

Decision

Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells ice cream mix.

Facts

The entity is a food supplier. The entity is selling ice cream mix.

The ice cream mix is an ingredient for making ice cream. It is not aerated and must be mixed with other ingredients and further processed to become ice cream. The ice cream mix is not intended to be eaten in its current state.

The ice cream mix is not supplied for consumption on the premises from which it is supplied.

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 it satisfies the definition of food in section 38-4 of the GST Act and it does not come within any of the exclusions listed in section 38-3 of the GST Act.

The meaning of food in section 38-4 of the GST Act includes ingredients for food for human consumption (paragraph 38-4(1)(b) of the GST Act). Ice cream mix is an ingredient used in making ice cream. As ice cream is food for human consumption, ice cream mix is an ingredient for food for human consumption. Therefore, the ice cream mix comes within the meaning of food contained in paragraph 38-4(1)(b) of the GST Act.

However, paragraph 38-3(1)(c) of the GST Act provides that 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).

The category of food from Schedule 1 that is of particular relevance is 'ice cream food'. Specified in this category are the following items:

•: item 28 - ice cream, ice cream cakes, ice creams and ice cream substitutes;
•: item 29 - frozen confectionery, frozen yoghurt and frozen fruit products (but not frozen whole fruit);
•: item 30 - flavoured iceblocks (whether or not marketed in a frozen state); and
•: item 31 - any food similar to food listed in items 28 to 30.

Ice cream mix is not food of a kind specified in items 28 to 30 in Schedule 1. All of those listed items do not require the addition of any other ingredients in order to be ready for consumption, whereas the ice cream mix is not intended to be eaten in its current state. Instead, the ice cream mix, which is not aerated, must be mixed with other ingredients and further processed to become ice cream.

Furthermore, for these same reasons, the ice cream mix is not covered by item 31 in Schedule 1 because it is not food that is similar to any of the products listed in items 28 to 30 in Schedule 1. Therefore, ice cream mix is not food of a kind that is specified in Schedule 1 and accordingly, is not excluded by paragraph 38-3(1)(c) of the GST Act from being GST-free.

In addition, the ice cream mix is not sold for consumption on the premises from which it is supplied, nor does it 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 ice cream mix.

Date of decision: 5 October 2001

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
   paragraph 38-4(1)(b)
   Schedule 1 clause 1
   Schedule 1 clause 1 table item 28
   Schedule 1 clause 1 table item 29
   Schedule 1 clause 1 table item 30
   Schedule 1 clause 1 table item 31

Keywords
Goods & services tax
GST free
GST food
Ingredients for food

Siebel/TDMS Reference Number: CW240255

Business Line: Indirect Tax

Date of publication: 23 October 2002

ISSN: 1445-2782

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