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Edited version of your written advice

Authorisation Number: 1051344209099

Date of advice: 28 February 2018

Ruling

Subject: GST classification of a food product

Question

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

Answer

Yes, your supply of a food product is GST-free under section 38-2 of the GST Act.

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 an Australian entity which is registered for GST.

You distribute and market a food product which is sold on-line and some of the Supermarkets.

The food product is dairy free, gluten free and vegan.

The food product is marketed as baking chocolate chips.

Ingredients

Sugar, Cocoa Mass, Cocoa Butter, Soy flour, emulsifier (soy Lecithin), salt and Vanilla Extract

The food product is made with 51% Cocoa solids providing an ideal balance between intensity and sweetness.

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 Section 38-4

Reasons of decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

The supply of the food product 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:

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

Based on the information provided, the supply of The food product by you satisfy the requirements of paragraphs 9-5(a), 9-5(b), 9-5(c) and 9-5(d) of the GST Act because:

The supply of the food product is not input taxed under any provisions of the GST Act or any other legislation.

The next step is to determine whether the supply of the food product is GST-free.

GST-free

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

The term 'food' is defined in paragraph 38-4 (1) of the GST Act as including:

Based on the information provided, the food product satisfies the definition of food under section 38-4 of the GST Act. Therefore next thing to consider is whether the food product falls within any of the exclusions in section 38-3 of the GST Act.

Subsection 38-3 (1) of the GST Act excludes certain foods from GST-free status. These include:

The food product is food for human consumption as they will be made from ingredients that are food for human consumption. Therefore, the food product is considered to be food for the purposes of the GST Act.

GST status

The GST status of foods for human consumption is outlined in the ATO public ruling "Detailed Food List" (Food list). The details on chocolate products are as follows:

Items

GST status

Notes

compound chocolate (marketed as an ingredient for confectionery)

taxable

Schedule 1, item 8 of the GST Act applies.

compound chocolate (not marketed as an ingredient for confectionery)

GST-free

Ingredients for food. Paragraph 38-4(1)(b) of the GST Act applies.

compound chocolate confectionery (e.g. Easter Eggs)

taxable

Schedule 1, item 8 of the GST Act applies.

confectioner's chocolate (marketed as an ingredient for confectionery)

taxable

Schedule 1, item 8 of the GST Act applies.

confectioner's chocolate (not marketed as an ingredient for confectionery)

GST-free

Ingredients for food. Paragraph 38-4(1)(b) of the GST Act applies

cooking/baking chocolate (marketed as an ingredient for confectionery)

taxable

Schedule 1, item 8 of the GST Act applies.

cooking/baking chocolate (not marketed as an ingredient for confectionery)

GST-free

Ingredients for food. Paragraph 38-4(1)(b) of the GST Act applies

Therefore where the chocolate products are marketed as an ingredient for confectionery, they will be excluded from being GST free under paragraph 38-3(1)(c) of the GST Act as the chocolate products are food of a kind specified in the third column of the table in clause 1 of Schedule 1 of the GST Act.

Item 8 of clause 1 of Schedule 1 of the GST Act provides:

However, if the chocolate products are not marketed as an ingredient for confectionery, they are GST-free under section 38-4 of the GST Act as they satisfy paragraph 38-4(1)(b) of the GST Act as Ingredients for food for human consumption.

We need to determine whether the food product is confectionery or food marketed as confectionery or food marketed as ingredients for confectionery for the purposes of Item 8 in Schedule 1 of the GST Act.

What is confectionery?

Food Industry Partnership- issues register in issue 12 discusses what do we mean by the term ‘confectionery’

It states:

Paragraph 1.45 of the EM goes on to say:

Issue 29 of Food Industry Partnership Issue register provides further guidance on the GST treatment of different types of chocolate. It states:

We need to consider the marketing factor of the food product.

Food marketed as confectionery and food marketed as ingredients for confectionery

Issue 29 of Food Industry Partnership Issue register further states:

Food marketed as confectionery

Food marketed as ingredients for confectionery

Based on the facts provided, we consider that the food product is marketed as baking chocolate chips and is not marketed as an ingredient for confectionery. Therefore the food product does not fall under confectionery nor is similar to those items. Accordingly, the food product is not taxable under item 8 of Schedule 1 of the GST Act and your supply of the food product is GST-free under section 38-2 of the GST Act.


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