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Edited version of private ruling

Authorisation Number: 1011487296981

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Ruling

Subject: Goods and services tax and classification of crackers

Question:

What is the GST treatment of your crackers?

Answer:

Supplies of your crackers are taxable supplies as they are excluded from being GST-free.

Further, the importation of these crackers will be a taxable importation.

Relevant facts and circumstances

You are registered for GST.

You run an enterprise of food manufacturing and distribution.

You supply your products to supermarkets.

You are introducing a new type of cracker product.

You have described this product alternatively as crackers and flatbread crackers.

You have provided a pack of crackers as a sample of the product for examination.

The crackers are supplied in a plastic packet enclosed in a cardboard.

The ingredients of these crackers are: wheat flour, potato, vegetable oil, extra virgin olive oil, sea salt, yeast, garlic, parsley, malt and flavours.

These crackers are crisp with a hard surface, and are savoury in taste.

The packaging of the product suggests the product is suitable for use on food platters and cheeseboards.

You import these crackers from an international source.

Reasons for decision

A supply of food is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (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 paragraph 38-4(1)(a) of the GST Act as 'food for human consumption (whether or not requiring processing or treatment)'.

You are supplying your crackers to retail outlets, and so it is understood that you supply these crackers as food for human consumption. Therefore, it falls within the definition of food for GST purposes.

However, under paragraph 38-3(1)(c) of the GST Act, a supply is not GST-free if it is 'food of a kind' specified in the third column of the table in clause 1 of Schedule 1 to the GST Act (Schedule 1), or food that is a combination of one or more foods at least one of which is food of such a kind.

The words 'of a kind' and their meaning have been considered in a number of court cases, including Hygienic Lily Ltd v. Deputy Commissioner of Taxation (NSW) (1987) 13 FCR 399 (Hygienic Lily Ltd). In his judgement in Hygienic Lily Ltd, Gummow J states:

the setting in which the phrase "goods of a kind" appears suggests it is directed not to the use for which the particular goods in question were designed or manufactured, nor to the purpose to which it is intended those particular goods shall be put, but rather to the nature, quality and adaptation of goods in the class or genus…

Item 32 in Schedule 1 (Item 32) is of relevance to your crackers. Item 32 covers food that is, or consists principally of, biscuits, cookies, crackers, pretzels, cones or wafers.

Your crackers are food of a kind specified in Item 32 as they are considered to be crackers. Therefore they are excluded from being GST-free under section 38-2 of the GST Act.

Moreover, your supply of these crackers is a taxable supply because you are registered for GST, and you will be supplying your product in Australia in the course or furtherance of your enterprise. Further, the importation of these crackers will be a taxable importation under section 13-5 of the GST Act, as the supply of these crackers in Australia is not GST-free.

Further information about GST and food products is available on our website www.ato.gov.au, which has a GST food classification decision tool and links to relevant issue registers.

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