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Ruling

Subject: GST and food

Question

Will your supply of a certain product (Product) be subject to goods and services tax (GST)?

Answer

No. Your supply of the Product will be GST-free as food for human consumption. Your importation of the Product will also be non-taxable as a consequence.

Relevant facts and circumstances

You are registered for GST.

You intend to import and supply unaltered the Product.

The Product is made from certain fruits. It also contains a sweetener and several other products in small amounts.

The Product is dehydrated to a particular moisture level and is dehydrated by the same process used to dry fruit.

The Product does not undergo any cooking or other treatment process.

The Product will be sold as dried fruit.

You do not intend to market the Product as confectionery or as an ingredient for confectionery but as a dried fruit product that can be eaten on its own or added to other food products.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999

Section 38-2

Section 38-3

Section 38-4

Schedule 1.

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. The Product will be marketed and sold as dried fruit and can therefore be treated as food for human consumption.

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).

Schedule 1 includes the following food items that may be of relevance when considering the GST treatment of your supply of the Product:

o confectionery, food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery (Item 8 of Schedule 1)

o crystallised, glace or drained fruit (Item 12 of Schedule 1), and

o food similar to that covered by Item 15 or 16 of Schedule 1, whether or not it consists wholly or partly of any vegetable, herb, fruit…(Item 18 of Schedule 1).

(note that Item 15 covers products such as potato crisps, sticks or straws, bacon or pork crackling or prawn chips and Item 16 covers seeds or nuts that have been processed or treated by salting, spicing, smoking or roasting or in any other similar way).

Item 8 of Schedule 1 (Item 8)

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

Confectionery is defined in the Macquarie Dictionary (5th edition) as 'confections or sweets collectively'. Furthermore, Aickin J in the High Court decision Landau and Anor v. Goldwater and Anor (1976) 13 ALR 192 gives 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.

The Product contains a sweetener. However, it is not enough for a product to be considered an item of confectionery simply because it has substantial amount of sweetening matter in it. The Product will be marketed and sold as dried fruit that can be eaten on its own or added to other food products. It won't be marketed as confectionery or as an ingredient for confectionery.

In relation to the term 'food consisting principally of confectionery', the Product does not contain any ingredients that can be considered as ingredients principally made for confectionary.

Given these circumstances, the Product does not fall within Item 8.

Item 12 of Schedule 1 (Item 12)

Item 12 provides that the supply of crystallised, glace or drained fruit is not GST-free. Crystallised, glace and drained fruit are not defined in the GST Act but they do 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.

In your case, the Product cannot be considered as being crystallised, glace or drained fruit and accordingly, the Product is not a product of a kind that falls within Item 12.

Item 18 of Schedule 1 (Item 18)

The Product has not undergone any cooking or other treatment process that will take away its dried fruit character. Consequently, the Product is not a product of a kind that falls within Item 18.

Finally, the supply of the Product will not fall within any of the other exclusions in section 38-3 of the GST Act. Consequently, your supply of the Product will be a GST-free supply of food under section 38-2 of the GST Act.

Non taxable importation

Please note that section 13-10 of the GST Act provides that an importation is a non-taxable importation if:

o it is a non-taxable importation under Part 3-2 of the GST Act, or

o it would have been a supply that was GST-free or input taxed if it had been a supply (for example, it would be a GST-free supply had the supply been made in Australia).

In your case, your supply of the Product in Australia will be GST-free and consequently, your importation will be non-taxable under section 13-10 of the GST Act.