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Ruling

Subject: GST and Food Additive

Question 1

Is your supply of the food additive (Product) subject to GST?

Answer

Yes

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are a company registered for goods and services tax (GST)

You market a range of different organic and inorganic raw materials.

The range is sourced from leading manufacturers throughout the world and supplied to clients.

This supply covers different aspects of commercial manufacture.

The Product is not packaged or marketed for retail sale.

The Product is supplied for use solely in the composition of food.

The Product does not have a stated nutritional value.

Relevant legislative provisions

All references are to the A New Tax System (Goods and Services Tax) Act 1999:

Section 38-2.

Section 38-3

Section 38-4

Subsection 38-3(1).

Paragraph 38-3(1)(e).

Paragraph 38-4(1)(b).

Paragraph 38-4(1)(e).

Regulation 38-3.02 of the A New Tax System (Goods and Services Tax) Regulations 1999

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 section 38-4 of the GST Act to include ingredients for food for human consumption (paragraph 38-4(1)(b) of the GST Act). Therefore, as an ingredient for food for human consumption your Product satisfies the definition of food under paragraph 38-4(1)(b) of the GST Act.

However, a supply of food which falls under section 38-3 of the GST Act is not GST-free under section 38-2 of the GST Act.

Paragraph 38-3(1)(c) of the GST Act includes food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Your Product is not food of a kind covered in Schedule 1.

Under paragraph 38-3(1)(e) of the GST Act a supply is not GST-free under section 38-2 of the GST Act if it is a supply of food of a kind specified in regulations made for the purposes of this subsection.

Effective from 1 December 2001 regulation 38-3.02 of the Regulations applies to 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.

Although the term 'food additive' is used in the Regulations, it is not defined elsewhere in the GST Act. Therefore the word additive will take its ordinary meaning. The word 'additive' is defined in The Macquarie Dictionary, 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 include colourings, flavourings, preservatives, antioxidants, sweeteners, vitamins, minerals and modifying agents.

For reasons we have stated, your Product satisfies the definition of an additive.

Sub regulation 38-3.02(1) of the Regulations states that food additives other than exempt food additives will be subject to GST. The term 'exempt food additive' is defined in sub regulation 38-3.02(2) of the Regulations to mean:

(a) a food additive which, at the time of supply is packaged and marketed for retail sale;

(b) a food additive which, at the time of supply:

(i) has a measurable nutritional value; and

(ii) is supplied for use solely or predominantly in the composition of food; and

(iii) is essential to the composition of that food.

At the time of supply your Product is not packaged or marketed for retail sale. Therefore, your Product is not an exempt food additive under paragraph 38-3.02(2)(a) of the Regulations.

Furthermore, to be considered an exempt food additive under paragraph 38-3.02(2)(b) of the Regulations your Product must have a measurable nutritional value, be used solely or predominantly in the composition of food and be essential to the composition of that food.

Although the term 'measurable nutritional value' is used in the Regulation, it is not defined elsewhere in the GST Act.

The ATO will accept that a product has a nutritional value for the purposes of the Regulation where the nutritional information is prepared in accordance with the Food Standards Code (FSC) published by the Australian and New Zealand Food Authority (ANZFA), and that information contains any measured values of nutrition (such as sugars, protein, fat or carbohydrates).

You state that when you supply your Product it is supplied solely in the composition of food. Therefore, it is accepted that your Product is an essential ingredient that forms part of the final composition of the food product.

You have advised that your Product does not have a stated nutritional value, therefore, your Product fails to satisfy the requirement in subparagraph 38-3.02(2)(b)(i) of the Regulations. Accordingly, it is subject to GST as it is not an exempt food additive.

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