Disclaimer
This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1012728645307

Subject: Food classification

Question 1

Is the supply of the frozen food GST-free?

Advice

No

Question 2

Is the importation of the frozen food a non-taxable importation?

Advice

No

Relevant facts and circumstances

• You are registered for the goods and services tax (GST).

• You import frozen food for wholesale. .

• The food consists of frozen pureed fruits and they are not made from whole fruits

• The packaging describes the foods as a nutritious frozen food ingredient for a beverage

• The ingredients consist of the fruits plus other ingredients.

• The instruction on the packaging advises the consumer to defrost the fruits before preparing the beverage. The food is blended with other liquids when preparing the beverage.

Reasons for decision

A supply of food is GST-free under section 38-2 of the GST Act provided that the supply does not come within any of the exclusions listed in section 38-3 of the GST Act.

Food is defined in section 38-4 of the GST Act to include ingredients for beverages for human consumption (paragraph 38-4(1)(d) of the GST Act). The product is marketed as an ingredient for preparing a beverage. Therefore the product satisfy the meaning of food in section 38-4 of the GST Act

Food listed in Schedule 1

Based on the information provided, we consider that the item in Schedule 1 of the GST Act (Schedule 1) that may apply to the frozen food is item 29 of Schedule 1 (item 29). Item 29 lists frozen confectionery, frozen yoghurt and frozen fruit products (but not frozen whole fruit. These food products are intended for consumption as frozen or soft served foods.

The frozen food are not frozen whole fruit. The ingredients of the food consist of the fruits plus other ingredients. Therefore, the food is not a fruit product excluded from being listed in item 29.

The food product is frozen fruits that is marketed for preparing a beverage. The instructions on the packaging advise the consumers to defrost the food before preparing the beverage. Based on this information we consider that the frozen food is not food of a kind listed in item 29. They are not supplied for consumption as frozen or soft served foods listed in item 29, such as frozen yoghurt or frozen fruit products. The food is not food listed in item 29 and are not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

Is the frozen food an ingredient for a beverage?

The term beverage is not defined in the GST Act except to the extent that it includes water. However, paragraphs 5 to 8 of Goods and Services Tax Determination GSTD 2002/2 outline the ATO view on beverages. Paragraphs 5 to 6 of GSTD 2002/2 state:

Therefore, a beverage is a liquid consumed (swallowed) to for the purposes of quenching thirst or for nourishment.

As indicated above, the consumer has to defrost the food and then blended with other liquids to prepare the beverage which is intended to be swallowed. The packaging promotes the food as a nutritious beverage ingredient. Therefore, the food product is a beverage for GST purposes and the food is an ingredient for a beverage.

Beverage or ingredient for beverage listed in Schedule 2

Next we have to consider whether the frozen food is an ingredient for preparing beverage that is listed in Schedule 2. Paragraph 38-4(1)(d) of the GST Act provides that where the food product is an ingredient for a beverage that is listed in Schedule 2, the ingredients for a beverage will be GST-free.

The beverage is not a beverage listed in Schedule 2, the ingredients for the beverage is therefore excluded from being GST-free by paragraph 38-3(1)(d) of the GST Act.

2 Is the importation of the frozen food a non-taxable importation?

Section 13-5 of the GST Act provides that the importation of goods into Australia is taxable importation if they are imported for home consumption within the meaning of the Customs Act 1901. However, the importation will not be a taxable importation if it is a non-taxable importation under section 13-10 of the GST Act.

The meaning of 'non-taxable importation' is provided in section 13-10 of the GST Act and it states:

* is a defined term in the GST Act

As discussed above, the supply of the frozen food is not GST-free. The food product is also not a non-taxable importation under Part 3-2 of the GST Act and therefore section 13-10 of the GST Act does not apply to the importation of the food product. The importation of the frozen food will be a taxable importation under section 13-5 of the GST Act when the food is imported into Australia for home consumption.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).