Edited version of private ruling

Authorisation Number: 1011631591328

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Subject: GST treatment of a food product

Question

Whether the supply of your food products (Products) is subject to goods and services tax (GST)?

Answer

No

Relevant facts and circumstances

You are registered for GST.

You manufacture dried vegetable products which are called Products.

The Products are made by fresh vegetables, washing them (for food safety reasons) and placing the vegetables into a mixer. Condiments and spices are also added at the mixing stage. The mixer breaks down the vegetables, nuts or seeds into smaller pieces. These smaller pieces are basically compressed together to form flat vegetables and the resulting vegetable flats are dried and then cut and packaged for sale.

The process is similar to frozen vegetables with added sauce mix where a similar degree of processing occurs: washing, chopping, mixing and freezing with the added condiments.

You have provided a number of advertising/promotion materials for your Products.

The Products are marketed to the retailers as food products.

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 it satisfies the definition of food in section 38-4 of the GST Act and does not come within any of the exclusions listed in section 38-3 of the GST Act.

Of relevance to your circumstances, section 38-4 of the GST Act includes as food:

· food for human consumption (whether or not requiring processing or treatment), or

· ingredients for food for human consumption.

The exclusions listed in section 38-3 of the GST Act apply where the food (not beverage) is:

· food for consumption on the premises from where it is supplied

· hot food for consumption away from the premises

· food listed in the table in clause 1 of Schedule 1 of the GST Act (Schedule 1)

· food of a kind specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (Regulations).

Therefore, provided the food does not fall into any of the above exclusions, section 38-2 of the GST Act treats the supply of food for human consumption (whether or not requiring processing or treatment) as GST-free.

In your case, as the key ingredients of the varieties of the Products consist of vegetables and the manufacturing process is similar they can be considered collectively as "The Products". The GST implications will be the same to any of the varieties..

It is considered that the Products are food for human consumption as they will be made from ingredients that are food for human consumption. Hence, the supply of your Products would be GST-free provided they do not meet any of the above exclusions.

The Products do not appear in the Regulations as a product that is excluded as a food; and you are to sell the Products to food retail outlets (that is, the food will not be consumed on the premises from where it is supplied by you and will not be supplied by you as hot food for consumption away from these premises).

Therefore, it is only necessary to determine if the Products are listed in Schedule 1 to determine if their supply will be GST-free.

Schedule 1

Clause 1 of Schedule 1 provides a table containing six categories of food (32 items) that are not

GST-free. Of relevance to your Products are the following items:

Item 8 of Schedule 1 (Item 8)

Item 10 of Schedule 1 (Item 10)

Item 11 of Schedule 1 (Item 11)

Item 12 of Schedule 1 (Item 12)

Item 15 of Schedule 1 (Item 15)

Item 16 of Schedule 1 (Item 16), and

Item 18 of Schedule 1 (Item 18). 

Items 8 and 10

Item 8 lists confectionery, food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery.

Item 10 lists confectionery novelties.

The term 'confectionery' is not defined in the GST Act and therefore, we use its ordinary meaning. Confectionery is defined in the 3^rd edition of The Macquarie Dictionary 1998 (Dictionary) to mean 'confections or sweets collectively'. Confection is further defined as 'a sweet preparation (liquid or dry) of fruit or the like as preserve or sweetmeat'.

 Aickin J in the High Court decision Landau and Anor v. Goldwater and Anor (1976) 13 ALR 192 gave the following general description of confectionery:

They are primarily small articles of a sweet character containing substantial amounts of sugar and regarded as being in the nature of a delicacy in whatever quantity they may be consumed.

Your Products will have no sugar added throughout the manufacturing process and the food will retain its character as dried vegetable.

The Products will also not be marketed as confectionery or ingredients for confectionery. They will be marketed as snack of dried vegetable which contains no added sugar.

Consequently, we consider that the Products do not have the above characteristics to be treated as confectionery or as confectionery novelties, the ingredients for confectionery or as food that consists principally of confectionery.

Item 11

Item 11 lists food known as muesli bars or health food bars, and similar food stuffs.

Muesli bar

Your Products are not considered to be a muesli bar as they consist primarily of dried vegetable and are not made from a muesli mixture (see further below).

Health food bar

The term health food bar is not defined in the GST Act. Furthermore, the term is not defined in the Dictionary and there is no generally accepted description of what constitutes a health food bar. Accordingly, the meaning of this term is ambiguous.

Where the meaning of a term is ambiguous, subparagraph 15AB(1)(b)(i) and paragraph 15AB(2)(e) of the Acts Interpretation Act 1901, make it permissible to refer to the explanatory memorandum to the relevant Act in determining the meaning of the provision.

Paragraph 1.3 of the Further Supplementary Explanatory Memorandum to A New Tax System (Goods and Services Tax) Bill 1998 states:

 The amendments will ensure that basic food for human consumption is GST-free. In addition, they will ensure that the current WST [wholesale sales tax] exemptions for food are, in general, maintained.

Under the WST system, the following guidelines were developed to indicate the characteristics of muesli bars and health food bars. These characteristics are:

· Muesli bars and health food bars have less than 55% real fruit content.

· Muesli bars and health food bars contain significantly more than 10 per cent added sugars in any form.

· Muesli bars and health food bars have greater than 2% added fat.

· Muesli bars and health food bars are multi component such as fruits, nuts, cereals, sugars, milk etc.

Health food bars are also often characterised and distinguished in the market place by their (real or perceived) health giving properties.

Terms that are used to describe health food bars include sweetened with honey, rice syrup or raw sugar; no added artificial colours, flavours or preservatives; high in fibre, low in salt, cholesterol free; a natural product, organic; made with only the best ingredients; a healthy snack; gluten free; dairy free; fat free; and caffeine free. Health food bars also often contain fruit, nuts and seeds.

Your Products do not meet to a sufficient degree any of the characteristics listed above to be treated as a health food bar.

Other similar foodstuffs

As new foodstuffs are constantly developed and entering the market place, this discussion is not intended to be exhaustive.

The GST Act does not define the meaning of similar foodstuffs, however the word similar is defined in the Dictionary to mean having a likeness, or to resemble these bars, especially in a general way.

The term 'foodstuff' is further defined in the Dictionary as a substance or material suitable for food.

Therefore, in order to be similar to a muesli or health food bar, the product would need to have a likeness to or resemble these bars and take the same shape. Other similar foodstuffs may include fruit bars and energy bars.

Your Products cannot be considered as being similar to either muesli or health food bars given their appearance, packaging, marketing and ingredients.

Items 15 and 16

The Products are not potato crisps, sticks or straws, corn chips or crisps, bacon or pork crackling or prawn chips under Item 15.

The Products are not seeds or nuts that have been processed or treated by salting, spicing, smoking or roasting in any other similar way under Item 16.

Item 18 Food similar to that covered by Item 15 or16

Although the Products consist of partly vegetable, they are not similar to any of the savoury snacks listed in Item 15 or 16.

In conclusion, it is considered that as your Products are not excluded by section 38-3 of the GST Act. You are making a GST-free supply when you sell your Products.

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