Edited version of your written advice

Authorisation Number: 1051288342644

Disclaimer

You cannot rely on this edited version in your tax affairs. You can only rely on the advice that we have given to you or to someone acting on your behalf.

The advice in the Register has been edited and may not contain all the factual details relevant to each decision. Do not use the Register to predict ATO policy or decisions.

Date of advice: 25 October 2017

Ruling

Subject: GST classification of various food products

Question

Is the supply of the below listed food products GST-free pursuant to section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Relevant facts and circumstances

You manufacture and sell a range of food products. You are registered for GST.

Your food products are made using certified organic ingredients wherever possible.

Included with your private ruling application is “Appendix A”, which provides a description of each of your food products, how they are packaged, labelled and sold, how they are marketed, how they are prepared and used.

You also provided a copy of your brochure and samples of your food products.

Product A

● Product A is a dry mixture of the raw healthy ingredients with the only preparation prior to sale being cutting/grounding into smaller portions.

● It is combined with either coconut oil or water and the resulting mixture then shaped into the balls before refrigerating. Once cooled, the product can be consumed without further preparation.

● Generally prepared at home or any location where refrigeration is available. Once prepared and chilled, can be consumed immediately or packed as snacks or lunches for school, work, and etcetera.

Product B

● A mixture of highly nutritious health foods, most of which are certified organic, that you add to breakfast foods, porridge, yoghurt, smoothies, cut fruit, protein shakes and anything else that the customer chooses.

● The product is soaked in water (generally overnight) and then stored in a cool place.

● The majority of individual ingredients including nuts and seeds are combined with no additional preparation aside from cutting/grounding into edible portion amounts.

Product C

● A nutritional blend of seeds, spices and flour to which you add water, refrigerate, bake and cut into portions for serving.

● Once prepared, it is consumed at room temperature as a healthy snack.

Product D

● A combination of seed, wheat and spices. The product is very similar in composition and use to Egyptian Dukkah although some variation in the ingredients to enhance taste and/or nutritional content.

● Consumed as a condiment in which you either sprinkle over or dip food into.

● Savoury option for lunches - Super nutritious, flavoursome & crunchy topper!

Product E

● An organic supplement to increase the nutritional value of smoothies, juices, shakes or simply drink mixed with water & a dash of lemon or lime.

● The product is in powder form and can be prepared anywhere.

Your food products are packed in air-tight resealable bags.

Your food products are ingredients for food or beverage for human consumption.

Your food products are promoted primarily via:

● display stands at stall on farmers markets

● customer database – register for email updates, recipes and other material you distribute

● word of mouth.

Your food products are sold in local farmers markets, online, health food stores, independent grocers, specialty stockists and wholesalers.

Your website provides a listing of markets across Australia and stockists across Australia.

Similar products are sold in supermarkets and are located in the health food aisle.

Your food products are food or beverage not listed in the (European Article Numbering (EAN) Register) GS1net Registry.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 38-2.

A New Tax System (Goods and Services Tax) Act 1999 Section 38-3.

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-3(1)(c).

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-3(1)(d).

A New Tax System (Goods and Services Tax) Act 1999 Section 38-4.

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-4(1)(a).

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-4(1)(b).

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-4(1)(d).

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-4(1)(e).

Reasons for decision

Summary

The supply of Products A, B, C and D is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

The supply of Product E is a taxable supply under section 9-5 of the GST Act.

Detailed reasoning

The supply of the food products is a taxable supply if the requirements of section 9-5 of the GST Act are satisfied.

Section 9-5 of the GST Act states:

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and

(c) the supply is *connected with the indirect tax zone; and

(d) you are *registered, or *required to be registered for GST.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

(* denotes a term defined in section 195-1 of the GST Act.)

In your case, the supply of the food products satisfy the requirements of paragraphs 9-5(a), 9-5(b), 9-5(c) and 9-5(d) of the GST Act because:

● you supply the food products for consideration.

● the supply of the food products is made in the course of your enterprise.

● the supply of the food products is connected with Australia and

● you are registered for GST.

The supply of the food products is not input taxed. It remains to be determined if the supply of the food products is GST-free.

A supply of food is GST-free under section 38-2 of the GST Act if it satisfies the definition of food in section 38-4 of the GST Act and it is not excluded by section 38-3 of the GST Act.

Food is defined in section 38-4 of the GST Act to include:

● food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act)

● ingredients for food for human consumption (paragraph 38-4(1)(b) of the GST Act)

● ingredients for beverages for human consumption (paragraph 38-4(1)(d) of the GST Act)

● goods to be mixed with or added to food for human consumption (including condiments, spices, seasonings, sweetening agents or flavourings (paragraph 38-4(1)(e) of the GST Act)

Section 38-3 of the GST Act provides that a supply of food is not GST-free if, among others, it is a supply of:

● food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1) (paragraph 38-3(1)(c) of the GST Act)

● a beverage (or an ingredient for a beverage), other than a beverage (or ingredient) of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2) (paragraph 38-3(1)(d) of the GST Act).

Product A

You market Product A as an ingredient for making balls that can then be eaten as snacks or for lunch. Therefore, Product A fall within the meaning of food under paragraph 38-4(1)(b) 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 that is specified in Schedule 1.

From the information provided, Product A is not considered to be food of a kind specified in Schedule 1 and do not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the supply of Product A is GST-free under section 38-2 of the GST Act.

Product B

Product B is made of various ingredients including nuts and seeds. The product is soaked in water, generally overnight. You can then add it to your breakfast foods, yoghurt, smoothies, cut fruit, protein shakes and anything else that you choose. The information you provided indicates that Product B is usually used as ingredient for food rather than consumed as food on its own or as ingredient for beverages. Therefore, Product B falls within the meaning of food under paragraph 38-4(1)(b) of the GST Act.

Item 16 of Schedule 1 to the GST Act (Item 16) provides that seeds or nuts that have been processed or treated by salting, spicing, smoking or roasting, or in any other similar way is not GST-free.

From the information provided, Product B contains nuts and seeds that have not been processed or treated by way of salting, spicing, smoking or roasting, or in any other similar way. Therefore, Product B does not fall under Item 16.

Product B is not considered to be food of a kind specified in Schedule 1 and do not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the supply of Product B is GST-free under section 38-2 of the GST Act.

Product C

Product C is a premix marketed as an ingredient to make your own crackers. Therefore, Product C falls within the meaning of food under paragraph 38-4(1)(b) of the GST Act.

Item 32 in the table in Schedule 1 (Item 32) provides that food that is, or consists principally of, biscuits, cookies, crackers, pretzels, cones or wafers is excluded from being GST-free. Item 32 is further expanded by clause 2 of Schedule 1 which provides that for the purpose of determining whether particular food is covered by Item 32, it does not matter whether it is supplied hot or cold, or requires cooking, heating, thawing or chilling prior to consumption.

In order to determine whether the supply of Product C comes within the class/genus of items described in Item 32, it is necessary to determine the ordinary meaning of 'crackers’ described in that item.

Cracker is defined in the Macquarie Dictionary Online as “a thin, crisp biscuit”. Biscuit is defined as:

noun 1.

a. a stiff, sweet mixture of flour, liquid, shortening and other ingredients, shaped into small pieces before baking or sliced after baking.

b. a savoury, unleavened similar mixture, rolled, sliced and baked crisp.

Product C is a dry product mixture supplied as an ingredient for making crackers. Product C is not a cracker nor does it consist principally of biscuits, cookies, crackers, pretzels, cones or wafers. Also, Product C is not in a form ready to make the crackers as water needs to be added, and then after refrigeration, oil is also added. As such, Product C is not covered by Item 32.

Product C does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the supply of Product C is GST-free under section 38-2 of the GST Act.

Product D

Under paragraph 38-4(1)(e) of the GST Act food includes goods to be mixed with or added to food for human consumption (including condiments, spices, seasonings, sweetening agents or flavourings).

The document Food Industry Partnership – issues register lists major issues and subsidiary questions, which have been collated as a result of consultations with the Food sector. In particular, issue 11 states (in part):

Those products included in paragraph 38-4(1)(e) of the GST Act include:

● condiments (for example, tomato sauce, jam, chutney)

● spices (for example, pepper, cinnamon, cloves)

● seasonings

● sweetening agents

● flavourings (for example, vanilla essence).

Products that satisfy paragraph 38-4(1)(e) are used for the purpose of adding to the taste or flavour of finished foods.

Product D is marketed as a condiment which can be added or sprinkled on other food to enhance taste and/or nutritional content. Product D has the essential character of the class of goods listed above such as condiments, seasonings or flavourings. Therefore, Product D satisfies the definition of food in paragraph 38-4(1)(e) of the GST Act.

Product D is not food of a kind specified in Schedule 1. In addition, Product D does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the supply of Product D is GST-free under section 38-2 of the GST Act.

Product E

Product E is a powdered product intended to be mixed with water, juice, smoothies or shakes and then consumed. Therefore, Product E falls within the meaning of food under paragraph 38-4(1)(d) of the GST Act.

However, under paragraph 38-3(1)(d) of the GST Act, beverages (or ingredients for beverages) are only GST-free if they are specified in Schedule 2.

Product E is not specifically listed in Schedule 2. Although Product E is an ingredient for beverages, it is not an ingredient of a kind specified in Schedule 2. Hence, the supply of Product E is not GST-free under section 38-2 of the GST Act.

In addition, the supply of Product E is not GST-free under any other provision of the GST Act or another Act. Therefore, as all the requirements of section 9-5 of the GST Act are satisfied, the supply of Product E is a taxable supply.

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).