ATO Interpretative Decision

ATO ID 2004/496

Goods and Services Tax

GST and lye water
FOI status: may be released

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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 supplies lye water?

Decision

No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies lye water. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts

The entity is a food supplier. The entity supplies lye water in bottles. The product is diluted with water to make a solution. This solution is used to refresh dried seafood before cooking. Food needs to be rinsed to remove the lye water solution before cooking.

The ingredients are: water, potassium carbonate and sodium bi-carbonate.

The entity is registered for goods and services tax (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 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 ingredients for food for human consumption.

The lye water is used as a solution to refresh dried seafood before cooking. The food needs to be rinsed to remove the lye water solution before cooking. Although the lye water is applied to the food it is rinsed off before the food is cooked and as such is not an ingredient for that food. Accordingly, the lye water is not considered to be an ingredient for food for human consumption.

As lye water does not come within the meaning of 'food' in section 38-4 of the GST Act, it is not GST-free 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 any other provision of 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 supplies lye water.

Date of decision: 26 May 2003

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   section 38-2
   section 38-3
   section 38-4
   Division 38
   Division 40

Keywords
Goods and services tax
GST food
Ingredients for food
Taxable supply

Siebel/TDMS Reference Number: 3553307

Business Line: Indirect Tax

Date of publication: 18 June 2004

ISSN: 1445-2782

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