ATO Interpretative Decision
ATO ID 2004/289
Goods and Services Tax
GST and fruit in alcoholFOI status: may be released
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 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 fruit in alcohol?
Decision
Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells fruit in alcohol.
Facts
The entity is a food supplier. The entity sells jars that are filled with fruit in alcohol.
The fruit in alcohol is not marketed as confectionery or as an ingredient for confectionery or food consisting principally of confectionery.
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 the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act.
Food is defined in section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act). The fruit in alcohol is food for human consumption and therefore, satisfies the definition of food in paragraph 38-4(1)(a) 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 specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1).
Item 12 in Schedule 1 (Item 12) lists crystallised fruit, glace fruit and drained fruit. The product that the entity sells is fruit in alcohol. The fruit in alcohol is not a fruit product as described in Item 12.
Item 8 in Schedule 1 (Item 8) lists confectionery, food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery.
The term 'confectionery' is not defined in the GST Act. However, Aickin J in the High Court decision Landau and Anor. v. Goldwater and Anor (13 ALR 192) gave the following general description of confectionery:
They are primarily small articles of a sweet character containing substantial amounts of sugar and regarded as being in the nature of a delicacy in whatever quantity they may be consumed.
Fruit in alcohol is not primarily small articles of a sweet character containing substantial amounts of sugar and the presentation of fruit in alcohol is not enough to make this product a confectionery product. Therefore, the fruit in alcohol is not confectionery. In addition, the product is not marketed as confectionery or as an ingredient for confectionery or food consisting principally of confectionery.
Fruit in alcohol is not covered by Item 8 and the excluding provision of paragraph 38-3(1)(c) of the GST Act does not apply. The supply of fruit in alcohol 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 fruit in alcohol.
Date of decision: 5 December 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)(a)
Schedule 1 clause 1
Schedule 1 clause 1 table item 8
Schedule 1 clause 1 table item 12
Case References:
Landau and Anor v. Goldwater and Anor
(1976) 13 ALR 192
Keywords
Goods and services tax
GST free
GST food
Food for human consumption
ISSN: 1445-2782
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