Edited version of private advice

Authorisation Number: 1052281609823

Date of advice: 26 July 2024

Ruling

Subject:GST - food or product

Question

Are you making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 when you sell the specified product (product)?

Answer

Yes.

This ruling applies for the following periods:

The tax periods commencing XXXX and ending XXXX.

The scheme commenced on:

XXXX

Relevant facts and circumstances

You are registered for GST.

The product is a natural product that is derived from a specified plant.

The product is dried out and cut into small pieces and packed into boxes. Boxes of the product are shipped to you.

You receive the product loose in boxes. You do not alter the product in any way, you simply weigh and package the product.

You sell the product solely through your online store via your website directly to consumers. You sell the product in packages of X grams for $X per packet.

You provided a sample of the product in its packaging. The pieces of product are of a certain size, weight, colour and texture.

The flavour of the product may be considered earthy.

The product is not usually swallowed but can be.

Nutritional information of the product is provided on the packaging.

The product is advertised online via your website and social media accounts.

The product is predominantly promoted as possessing certain specified attributes that enables the consumer to alter certain aspects of their physical appearance by consuming the product.

The product is also promoted as offering certain health and therapeutic benefits.

Your website and social media accounts contain several positive client reviews, many of which comment on how the product has altered and improved their physical appearance.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

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 section 38-4

Reasons for decision

Summary

Yes. We consider that the product is not food for the purposes of section 38-4 of the GST Act. The supply of the product therefore is a taxable supply. You are liable to pay GST on the sale of the product.

Detailed reasoning

You make a taxable supply under section 9-5 of the GST Act, and are therefore liable to pay GST, if:

•         you make a supply for consideration (payment); and

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

•         the supply is connected with the indirect tax zone (Australia); and

•         you are registered, or are 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.

Your supply of the product meets the first four requirements of section 9-5 of the GST Act. Additionally, the supply of the product is not input taxed. Therefore, what is left to consider is whether the supply of the product is GST-free.

A supply of food is GST-free under section 38-2 of the 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 as:

(a)          food for human consumption (whether or not requiring further processing or treatment)

(b)          ingredients for food for human consumption

(c)          beverages for human consumption

(d)          ingredients for beverages for human consumption

(e)          goods to be mixed with or added to food for human consumption (including condiments, spices, seasonings, sweetening agents or flavourings)

(f)          fats and oils marketed for culinary purposes.

...

There is no absolute definition of 'food'. Within section 38-4 of the GST Act, 'food' takes its ordinary meaning subject to context. In this case, nothing in the wider context suggests that consideration needs to be had to anything other than the ordinary meaning.

Per Bristol-Myers Co Pty Ltd v Federal Commissioner of Taxation (1990) 23 FCR 126 at [21], the ordinary meaning of 'food' is something that 'is eaten or taken into the body for nourishment, to maintain life and growth'.

Dictionary definitions of the related words 'nourishment', 'nourish' and 'nutriment' refer to any matter taken for sustenance and to promote growth, replace loss and provide energy. This suggests that food generally provides some nutritional value, however, there is no minimum threshold nutritional level that must be satisfied for something to be 'food'. An overall assessment of the essential character of the product must be made.

The product is marketed to appeal to those wishing to improve certain aspects of their physical appearance. The marketing of the product is predominantly based around the benefits pertaining to altering one's physical appearance, that occurs as a result of consuming the product. Some health benefits are also mentioned in your promotional materials, but these benefits are secondary to the primary purpose of the product. Additionally, consumer reviews of the product show that many consumers claim that this product has worked for its intended purpose. This demonstrates that consumers regard the product designed mainly for altering physical appearance, rather than food.

Accordingly, we consider that the product is not food for the purposes of section 38-4 of the GST Act and therefore the supply of the product is not GST-free under section 38-2 of the GST Act.

The supply of the product is a taxable supply as it meets all the requirements of section 9-5 of the GST Act. You are liable to pay GST when you sell the product.

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