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Ruling

Subject: GST and flavoured dried fruit

Question

Is your supply of the flavoured dried fruit a GST-free supply?

Answer

Yes. Your supply of the flavoured dried fruit is a GST-free supply

Relevant facts and circumstances

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

You are an importer and distributor of dried fruit throughout retailer chains in Australia.

You intend to supply a new product which is a dehydrated diced fruit (the product). The product is sugar and juice infused and machine dried to a very low moisture level and crispy in texture.

The product can be added as an ingredient to cereals, fruit salad and yoghurt or eaten plain.

You do not intend to market the product as confectionery. The product will be sold in the dried fruit section of retailer outlets.

The product will be available in plain and other flavours.

The product does not have any artificial colouring or added sugar.

The sugar measurement in the product is a combination of the naturally occurring sugar in fruit plus the fruit concentrate and any other ingredients that may contain sugar such as the natural colours and flavours. The fruit's natural sugar content becomes very condensed and therefore a much higher percentage when compared to fresh fruit.

Reasons for decision

A supply of food is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (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.

The definition of food in section 38-4 of the GST Act includes food for human consumption, whether or not requiring processing or treatment.

Paragraph 38-3(1)(c) of the GST Act provides that 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).

The product is plain and flavoured dried fruit and is considered as food for human consumption.

The issue of whether the product is GST-free falls for consideration under Item 12 in Schedule 1 (Item 12) and Item 8 in the same Schedule (Item 8). 

Item 12

Item 12 provides that crystallised fruit, glace fruit and drained fruit are not GST-free. Crystallised fruit, glace fruit and drained fruit are not defined in the GST Act. However, they have a special meaning in the Food Industry. The Food Industry considers that crystallised, glace and drained fruits are fruits that have been immersed in syrup. After immersion, they are treated differently. In the case of crystallised fruit, crystals are formed on the surface or through the fruit when the syrup is dried. Glace fruit is produced when syrup is dried, leaving the fruit with a coat of syrup. In the case of drained fruit, the excess syrup is drained off after immersion.

You have advised that the dried fruit has been flavoured rather than immersed in syrup. Furthermore, the product is neither drained, glace nor crystallised. Accordingly, the product is not a kind of crystallised fruit, glace fruit or drained fruit and Item 12 does not apply.

Item 8

Item 8 provides that confectionery is not GST-free and it includes food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery.

The term 'confectionery' is not defined in the GST Act and therefore must be given its ordinary meaning.

Confectionery is defined in the Australian Oxford Dictionary as 'sweets and other confections.' Confection is defined amongst other things, as 'a dish or delicacy made with sweet ingredients.'

Furthermore, Aickin J in the High Court decision Landau and Anor v. Goldwater and Anor (1976) 13 ALR 192 gave the following general description of 'confectionery':

one of common usage which embraces a wide variety of articles, many readily recognisable as examples of confectionery. They are primarily small articles of a sweet character containing substantial amounts of sugar and regarded as being in the nature of a delicacy in whatever quantity they may be consumed.

Your product is manufactured in a way that does not greatly increase the sugar content of the fruit or change the characteristics of the fruit. The product is similar to fruit products generally classed as 'dried fruit', that is fruit which is dried or semi-dried with little, if any, additional additives. It is therefore considered, based on your facts provided, that the product is not confectionery.

You advised that you market the product as dried fruit and not as confectionery and it will be sold in the dried food section of the retailer outlets. It will also be marketed as an ingredient to cereals, fruit salad and yoghurt or eaten plain. Therefore, Item 8 does not apply.

Further, dried fruit is listed in the Tax Office's publication 'GST food guide' as GST-free.

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

In addition, the supply of the product does not fall within any of the other exclusions in section 38-3 of the GST Act.