Edited version of private ruling

Authorisation Number: 1011607567932

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Ruling

Subject: GST and the supply of 'fish and crackers'

Is a supply of the 'fish and cackers' product a mixed supply that is partly taxable and partly GST-free, to be valued in accordance with section 9-80 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

No, a supply of the product is not a mixed supply that is partly taxable and partly GST-free, to be valued in accordance with section 9-80 of the GST Act. A supply of the product is a taxable supply in accordance with section 9-5 of the GST Act.

Relevant facts and circumstances

The entity is registered for the goods and services tax (GST).

The entity sells a 'fish and crackers' product.

The 'fish and crackers' product is a combination of fish and crackers that are individually packaged and then combined together using an outer package.

The fish is a single serve size, contained in a plastic tub sealed with foil. The crackers are contained in a foil-wrapped packet. The packet of crackers is then encased in a hard plastic shell which clicks on to the fish tub, to form a single package containing the two items which are sold together as a single product, for human consumption.

The package has a single label which identifies and markets the product as fish and crackers. The fish tub and packet of crackers are not individually labelled.

The packaging states that the fish and crackers are 'not for individual sale'.

Reasons for decision

Section 9-5 of the GST Act provides that an entity makes a taxable supply when the requirements in that section are met. An entity makes a taxable supply under section 9-5 of the GST Act if:

· it makes the supply for consideration;

· the supply is made in the course or furtherance of the entity's enterprise;

· the supply is connected with Australia; and

· the entity is registered or required to be registered.

All the above four requirements must be fulfilled in order for a taxable supply to take place. 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).

You advised that both the fish and the crackers are food for human consumption, and therefore, 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.

Fish is not food of a kind specified in Schedule 1 and is, therefore, GST-free. However, crackers 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 crackers are specified at Item 32, they are not GST-free.

It is therefore necessary to determine whether the 'fish and crackers' product is '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.

The Macquarie Dictionary (1997) (the dictionary) defines 'combination' to mean:

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 and can be interpreted in more than one way, 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 A New Tax System (Goods and Services Tax) Bill 1998 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 (eg. 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).

The GST Food Guide on our website states the following in relation to snack packs, hampers and mixed supplies.

Snack packs

Snack packs can contain a combination of GST-free and taxable goods. How you treat them for GST purposes depends on their contents and packaging.

Example: Snack packs

Where a GST-free food item is packaged together with a taxable food item (for example cheese and biscuits) as a snack pack, it is subject to GST. The snack pack is taxable as the items are packaged together, marketed and sold as a single product.

Hampers and mixed supplies

Where a mix of GST-free and taxable individually packaged goods is packed and sold together (such as a hamper containing a packet of biscuits, a box of chocolates, a coffee cup and a jar of coffee), you tax these items individually as a mixed sale. The biscuits, chocolates and cup are taxable and the coffee is GST-free.

A hamper can be a basket, decorative box or other similar container holding any number of separately identifiable products. If the hamper has packaging that has a lasting value (for example, a picnic basket), the sale of the packaging is subject to GST.

In the case of the product 'fish and crackers', although the fish and the crackers are individually packaged, that is, the fish is contained in a separately sealed tub and the crackers are in a separately sealed packet, the two packages are not separately identified or identifiable products as they are not individually labelled.

There is a single label identifying the packaged product containing the two items to be sold together as a single product as 'fish and crackers. Therefore, it is our view that the product is of a kind of snack pack described above. The product 'fish and crackers' is 'a combination of one or more foods at least one of which is food of such a kind specified in Schedule 1'. As such, the 'fish and crackers' is a product that is excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

Moreover, paragraph 14 of Goods and Services Tax Ruling GSTR 2001/8: 'Goods and services tax: apportioning the consideration for a supply that includes taxable and non-taxable parts (GSTR 2001/8) states:

... a supply that may at first appear to be a combination of taxable and non-taxable parts, is not a mixed supply if it is given a specific treatment under the GST Act. For example, a supply consisting of a combination of foods that comes within paragraph 38-3(1)(c) is not a mixed supply because the whole supply is treated as food that is not GST-free.

As it is our view that the 'fish and crackers' product is given specific treatment under paragraph 38-3(1)(c) of the GST Act the supply of the product is not a mixed supply. The whole supply is therefore treated as food that is not GST-free.

In this case, the supply of the 'fish and crackers' product 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 supply of the 'fish and crackers' product is a taxable supply under section 9-5 of the GST Act.

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