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Ruling

Subject: GST and food

Question

Will your supply of the food product (Product) and associated packaging be subject to goods and services tax (GST)?

Answer

No.

Relevant facts and circumstances

§ You are registered for GST.

§ You are to sell the Product and packaging.

§ The packaging is made from a common container material. The packaging is similar in function to other non reusable food applicators.

§ No separate charge will be itemised for the packaging and the packaging has not been designed to be reused once the Product has been consumed.

§ The Product can be used in a number of ways.

§ The Product is to be sold in retail outlets near where condiments used in cooking are located.

§ The Product will not be marketed to be eaten from the packaging and will not be marketed as confectionery or as an ingredient specifically for confectionery.

Relevant legislative provisions

All references are to the A New Tax System (Goods and Services Tax) Act 1999:

Section 13-10

Section 38-2

Section 38-3

Section 38-4

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 ingredients for food for human consumption. Your Product will be sold in retail outlets as an ingredient for food for human consumption and consequently can be treated as food for GST purposes.

Your 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:

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

§ Item X of Schedule 1.

Item 8 of Schedule 1 (Item 8)

The Food Issues Register (available from the ATO website www.ato.gov.au) provides the ATO view on the GST treatment of the sale of certain food products. This register allows us to consider certain factors to assist in determining whether your Product is confectionery, a food marketed as an ingredient for confectionery or a food consisting principally of confectionery. It also provides examples illustrating the application of these factors.

The Product will not be marketed as a confectionery item or as an ingredient specifically for confectionery and it is not a food consisting principally of confectionery. It is to be sold in retail outlets near where condiments used in cooking are located and it will not be marketed to be eaten straight from the packaging. Given this, and the guidance provided by the factors and associated examples in the Food Issues Register, we consider that the Product does not come under Item 8.

Item X of Schedule 1

For reasons we have outlined to you, Item X does not apply.

Packaging

Under section 38-6 of the GST Act, a supply of packaging in which food is supplied is GST-free if the supply of the food is GST-free provided the packaging is necessary for the supply of the food and is of a kind in which food of that kind is normally supplied.

The ATO view on packaging for food is given by Goods and Services Tax Determination GSTD 2000/6. Paragraph 2 of GSTD 2000/6 states the following in relation to packaging:

Where the purpose of the packaging is simply to contain, protect and promote the food within, it will be a normal and necessary part of the supply of the food. For individual items, normal and necessary packaging includes tins, bottles, jars and boxes. For a group of items, normal and necessary packaging includes the carton or box that contains a number of individual items.

In this case the packaging is made from a common container material. The packaging is not reusable and is similar in function to other non reusable food applicators. Consequently, we consider the packaging to be necessary for the supply of the Product and of a kind in which the Product is normally supplied. Hence its supply would also be GST-free.

Given these circumstances, the supply of the Product is not exempted from being an ingredient for food for human consumption under section 38-3 of the GST Act. Consequently, it is a food as defined by subsection 38-4(1) of the GST Act and its supply would be GST-free. Accordingly, the packaging would also be GST-free as per section 38-6 of the GST Act.