Edited version of private ruling

Authorisation Number: 1011493451530

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Ruling

Subject: GST classification of food products

Decision 1

The supply of food product No1 is a supply of food that is a combination of one or more foods under paragraph 38-3(1)(c) of the GST Act.

The supply of food product No 1 is a taxable supply in accordance with section 9-5 of the GST Act.

Decision 2

The supply of food product No 2 is not a supply of food that is a combination of one or more foods under paragraph 38-3(1)(c) of the GST Act.

The supply of food product No 2 is a mixed supply that is partly taxable and partly GST-free, to be valued in accordance with section 9-80 of the GST Act. Accordingly, the supply of this product should be treated in accordance with the rule in section 9-80 of the GST Act.

Detailed reasoning

Section 9-5 of the GST Act provides that an entity makes a taxable supply when the requirements in that section are met. However, a supply is not a taxable supply to the extent that it is GST-free or input taxed.

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.

Paragraph 38-4(1)(a) of the GST Act provides that food includes food for human consumption (whether or not requiring processing or treatment).

The listed ingredients are food for human consumption, and satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act.

However, under paragraph 38-3(1)(c) of the GST Act, 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), or food that is a combination of one or more foods at least one of which is food of such a kind specified in Schedule 1.

Some of the ingredients are not food of a kind specified in Schedule 1. However, some ingredients are specified in item 32 of Schedule 1 (Item 32). Item 32 specifies food 'that is, or consists principally of, biscuits, cookies, crackers, pretzels, cones or wafers'. As these ingredients are specified at Item 32, they are not GST-free.

It is therefore necessary to determine whether the following supplies are supplies of 'food that is a combination of one or more foods at least one of which is a food of such a kind' specified in Schedule 1:

· food product No 1

· food product No 2.

The definition of 'combine' in The Macquarie Dictionary (1997) (the dictionary) includes: '1. the act of combining. 2. the state of being combined. 3. a number of things combined.' 4. something formed by combining …'.

The dictionary definition of 'combine' includes: 1. 'to bring or join into a close union or whole; unite; associate; coalesce.' 2. to possess or exhibit in union …'.

Since the dictionary definition of 'combine' includes terms such as 'bring into close union' and associate, the word 'combination' clearly could apply to a hamper or other supply that is treated as being partly taxable and partly GST-free. As the meaning of the word 'combination' is unclear, it is appropriate to turn to other sources to assist in the interpretation of this provision.

Subsection 15AB(1) of the Acts Interpretation Act 1901 (Acts Interpretation Act) provides that consideration may be given to material not forming part of an Act for particular purposes including 'to determine the meaning of the provision when the provision is ambiguous or obscure....'.

Paragraph 15AB(2)(e) of the Acts Interpretation Act provides that any explanatory memorandum relating to the Bill containing the provision is extrinsic material that may be considered for this purpose.

Therefore it is appropriate to consider the Further Supplementary Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998 (EM). The EM states:

'1.17 Food that is a combination of one or more foods, at least one of which is food of a kind specified in the table in new Schedule 1A of the Bill (prepared food, confectionery, savoury snacks, bakery products, ice-cream food and biscuit goods) is not GST-free. For example, a snack pack containing cheese and biscuits is not GST-free because it contains at least one type of food specified in new Schedule 1A (biscuits)...'

The EM clarifies the intended scope of this provision by stating:

'1.18 The exclusion in the above paragraph would not apply where a mix of packaged goods is packed and sold together (e.g. a hamper containing a packet of biscuits, box of chocolate and a jar of coffee). These items would be taxed individually (ie. Biscuits and chocolates subject to tax and the coffee GST-free).'

Therefore, a supply combining individual foods that are taxable (i.e., listed in Schedule 1) and GST-free, but which are supplied in a single tray and are not separated by their individual packaging (e.g. snack pack containing cheese and biscuits) is excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act, because it is 'a combination of food that contains a type of food specified in Schedule 1'.

It is considered that food product No 1 is a combination of food that contains a type of food specified in Schedule 1. Although the ingredient is separately sealed, the other ingredients are not separated from the total product by individual packaging. Therefore the product is like the snack pack described above and it is excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

This can be contrasted with a supply of individual foods that are taxable (i.e., listed in Schedule 1) and GST-free, but which are packaged individually and then wrapped and sold together (eg. a hamper). This type of supply is not 'a combination of food that contains a type of food specified in Schedule 1' because, as each food is individually packaged, they are not 'combined'. This is a mixed supply, with the GST status of each item being assessed independently.

It is considered that food product No 2 is a supply of ingredients which are individually packed and then wrapped together by additional outer packaging, similar to a hamper. Therefore, the supply is not 'a combination of one or more foods at least one of which is food of such a kind' specified in Schedule 1 and is not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

The supply of some ingreients satisfies all the positive limbs of section 9-5 of the GST Act and is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity's supply of the product is taxable under section 9-5 of the GST Act.

Since the product is GST-free, the entity is making a mixed supply and will need to apportion the consideration for food product No 2.

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