Edited version of private ruling

Authorisation Number: 1011606172277

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Ruling

Subject: GST application to food colourings in powder and liquid form

Question 1

Are you liable for goods and services tax (GST) when you sell food colouring marketed and packaged for wholesale in Australia?

Answers

Yes, you are liable for GST on the sale of food colouring marketed and packaged for wholesale in Australia.

Question 2

Will you be liable for GST on the importation of your food colouring to Australia?

Answers

Yes, you will be liable for GST on the importation of food colouring to Australia.

Relevant facts

You are a wholesale distributor of cooking supplies.

You requested advice about whether GST was applicable to the importation of food colouring in powder and liquid form.

You predominantly sell the food colouring to specified food manufacturers.

According to the label on the container the food colouring contains no nutritional value.

You informed us that your products are not packaged and marketed for retail sale and the products are mainly distributed for wholesale use.

You emailed to us a photograph of the product with an additional note stating the food colourings are sold in bottles of specified weights.

Each use of the food colouring requires approximately XX to be added to the food.

Question 1

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) (b) and (e) of the GST Act to include ingredients for food for human consumption; or goods to be mixed with or added to food for human consumption. Food colouring is used in the manufacture of foods. Therefore, food colouring can be considered an ingredient for food for human consumption or a good to be mixed with or added to food under paragraph 38-4(1) (b) and (e) of the GST Act.

However, under paragraph 38-3(1)(e) of the GST Act, a supply is not GST-free if it is food of a kind specified in regulations made for the purposes of subsection 38-3(1) of the GST Act.

Regulation 38-3.02 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) effective from 1 December 2001 deals with food additives. This Regulation gives effect to paragraph 38-3(1) (e) of the GST Act and determines those foods that are not GST-free.

Subregulation 38-3.02(1) of the GST Regulations provides that food additives, other than 'exempt food additives', are not GST-free. Although the term 'food additive' is used in the regulation, it is not defined elsewhere in the GST Act.

The word 'additive' is defined in The Macquarie Dictionary , 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW, to mean '...a substance added to a product, usually to preserve or improve its quality'. Examples of products that are considered to be additives for GST purposes are outlined in the Food Issues Register in Issue 11 to include colourings, flavourings, preservatives, antioxidants, sweeteners, vitamins, minerals and modifying agents. Your food colouring will therefore fall within the definition of 'additive'.

Paragraph 38-3.02(2) (a) of the GST Regulations outlines that a food additive which, at the time of supply, is packaged and marketed for retail sale is, an 'exempt food additive'. In your case your food colourings are not marketed for retail sale, rather they are packaged and marketed for use by restaurants and food manufacturers. Therefore, the food colouring you supply is not an 'exempt food additive' under paragraph 38-3.02(2) (a) of the GST Regulations.

Alternatively, paragraph 38-3.02(2) (b) of the Regulations provides that an additive is an 'exempt food additive' when it:

§ has a measurable nutritional value; and

§ is to be used solely or predominantly in the composition of food, and

§ is essential to the composition of that food.

In order for your food colouring to be considered an 'exempt food additive' it must meet all three requirements of paragraph 38-3.02(2)(b) of the Regulations.

The ingredients of the food colouring which you sell do not have a measurable nutritional value as indicated by the food labels which you provided. The Nutrition table in the product description indicates that there are no significant amounts of nutritional value in the food colouring. Therefore the food colouring you supply does not meet the first requirement of paragraph 38-3.02(2)(b) of the Regulations.

As the food colouring is suitable for a variety of food products and you supply it solely for use in the manufacture of food, the second requirement is met.

For the purposes of the GST Regulations, it is accepted that a product is 'essential' to an item of food if it is manufactured for use in food therefore the third requirement is also met.

As the food colouring you supply meets only two of the three requirements to be an 'exempt food additive'. It is not an 'exempt food additive' that falls within the scope of paragraph 38-3.02(2)(b) of the GST Regulations.

The food colouring you supply is of a kind specified as not being a GST free supply for the purposes of paragraph 38-3(1)(e) of the GST Act.

Question 2

GST is payable on taxable importations. Section 13-5 of the GST Act provides that you make a taxable importation if:

goods are imported; and

you enter the goods for home consumption (within the meaning of the Customs Act 1901).

However, the importation is not a taxable importation to the extent that it is a non-taxable importation. An importation is a non-taxable importation if:

it is a non-taxable importation under Part 3-2 of the GST Act; or

it would have been a supply that was GST-free or input taxed if it had been a supply.

As the supply of your food colouring is a taxable supply, the importation of food colouring is a considered a taxable importation.

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