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Ruling

Subject: GST and food

Question

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

Answer

No. Your supply of the Product will be GST-free as food.

Relevant facts and circumstances

You are registered for GST.

You are to supply the Product.

The Product consists of several ingredients.

During the manufacturing process the Product is dried and cooked to form a hard set jam like product.

One ingredient is heated prior to its addition to the mixture to facilitate its incorporation into the hot mixture in a homogeneous manner.

This method of manufacture is identical to that used in the making of jams except for the addition of one other ingredient.

The other ingredient has not been treated in any manner such as cooking or roasting prior to its addition into the mixture.

You have supplied some websites showing very similar products to your Product.

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. Your Product contains ingredients that are for human consumption and hence, the Product can be treated as food for human consumption.

Your supply of the Product does not fall within any of the exclusions in section 38-3 of the GST Act except possibly paragraph 38-3(1)(c). 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) or is a food that is a combination of one or more foods at least one of which is food of such a kind.

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

o food known as muesli bars or health food bars, and similar foodstuffs (Item 11 of Schedule 1)

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

o seeds or nuts that that have been processed or treated by salting, spicing, smoking or roasting, or in any other similar way (Item 12 of Schedule 1), and

o cakes, slices and puddings (Item 20 of Schedule 1).

Item 11 of Schedule 1 (Item 11)

The ATO view on muesli or health bars is given by the Goods and Services Tax Determination GSTD 2008/2 (available from the website www.ato.gov.au). This document provides that a muesli or health bar is a commercially-prepared and packaged snack made from a muesli mixture, usually sweetened and set in a bar shape. It further provides that similar foodstuffs must resemble muesli or health bars in a general way through their physical presentation and ingredients.

Your Product does not have the presentation or ingredients of muesli or health bars so are not covered by Item 11.

Item 12 of Schedule 1 (Item 12)

Item 12 provides that the supply of crystallised fruit, glace fruit and drained fruit is not GST-free. Crystallised fruit, glace fruit 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 drained, glace or crystallised and accordingly, the Product is not a product of a kind that falls within Item 12.

Item 16 of Schedule 1 (Item 16)

One ingredient is heated before being added to the Product mixture but this is not considered to be a similar process to smoking or roasting. Consequently, the Product is not a food where one of the ingredients is a food that appears in Schedule 1.

As a result, your Product is not exempted from being GST-free because of the addition of this ingredient.

Item 20 of Schedule 1 (Item 20)

The terms cakes, slices and puddings are not defined in the GST Act and are therefore afforded their ordinary meaning as provided by the Macquarie Dictionary (5th edition).

Cakes and slices

Cake is defined to mean amongst other things 'a sweet baked food in loaf or layer form, made with or without shortening, usually with flour, sugar, eggs, flavouring, usually with baking powder or soda, and a liquid'. The definition of slice is 'any of several cakes or biscuits cooked or formed as a thin slab and cut into rectangular pieces'.

Puddings

Pudding is defined to mean 'a sweet or savoury dish made in many forms and of various ingredients, as flour (or rice, tapioca, or the like), milk, and eggs, with fruit, meat, or other ingredients'. Issue 13 in the Food Industry Partnership Issues Register (also available from the ATO website) further adds to this definition and provides that a pudding is a cooked dish consisting of various sweet or savoury ingredients, especially as enclosed within a flour-based crust or mixed with flour, eggs, etc., and boiled or steamed; a baked batter mixture.

Give these definitions, your Product does not have the necessary characteristics to be covered by Item 20.

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