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ATO Interpretative Decision

ATO ID 2001/562

Goods and Services Tax

GST and the sale of culinary herbs
FOI status: may be released

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is the entity, a herb grower, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells culinary herbs?

Decision

Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells culinary herbs.

Facts

The entity is a herb grower. The entity sells culinary herbs which it labels and markets as being culinary herbs. These herbs are sold to buyers who use them for a range of purposes, from food manufacture to herbal medicines.

Culinary herbs are those herbs that are consumed primarily for culinary purposes, and are not consumed for their actual or perceived medicinal or therapeutic properties (that is, they are not consumed principally for medicinal or therapeutic reasons).

Culinary herbs are usually used as an ingredient or additive in food rather than consumed as food on their own. They are added to food to enhance the flavour either during the preparation process or once the food item is complete.

The entity is registered for goods and services tax (GST).

Reasons for Decision

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

Herbs can have both culinary and medicinal uses. Therefore, it is necessary to determine if herbs are food for the purposes 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);
•
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).

As the phrase 'food for human consumption' is not defined in the GST Act, it takes on its ordinary meaning. It is considered that the ordinary meaning of the phrase 'food for human consumption' would exclude products that are principally consumed for medicinal or therapeutic purposes.

The herbs that are being sold by the entity are culinary herbs. Culinary herbs are those herbs that are consumed primarily for culinary purposes. These herbs are usually used as an ingredient or additive in food rather than consumed as food on their own. They are added to food to enhance the flavour either during the preparation process or once the food item is complete. As the herbs have been labelled and marketed as being culinary herbs, it is clear that the intention of the entity is to sell herbs which are intended to be used primarily for culinary purposes and not for medicinal or therapeutic purposes. Therefore, culinary herbs are food under paragraphs 38-4(1)(b) and 38-4(1)(e) 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 the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Culinary herbs are not specifically listed in Schedule 1, nor are they food of a kind specified in Schedule 1.

In addition, the supply of culinary herbs does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells culinary herbs.

[Note: The mere fact that a herb is edible is not sufficient in itself for the herb to qualify as GST-free food. Nor is it appropriate to consider what purpose the purchasers are acquiring the herbs for. What is necessary, is to determine what the supplier is supplying. If the supplier is supplying culinary herbs then the supply is GST-free. Where the herbs being supplied are principally grown for their medicinal properties, are promoted as 'medicinal herbs' or are principally consumed for their medicinal or therapeutic properties, the supply is not a supply of food for GST purposes.]

Date of decision:  7 August 2001

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 38-2
   section 38-3
   pargraph 38-3(1)(c)
   section 38-4
   paragraph 38-4(1)(a)
   paragraph 38-4(1)(b)
   paragraph 38-4(1)(e)
   Schedule 1 clause 1

Related ATO Interpretative Decisions
ATO ID 2001/563

Keywords
Goods & services tax
GST free
GST food
Food for human consumption
Food seasoning
Ingredients for food

Siebel/TDMS Reference Number:  CW215447

Business Line:  Indirect Tax

Date of publication:  7 November 2001

ISSN: 1445-2782


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