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Ruling

Subject: GST and food snack

Question 1

Is your food Product GST-free in accordance with Section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes.

This ruling applies for the following periods:

N/A

The scheme commences on:

N/A

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it.

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

You produce a Product for human consumption.

The Product consists of dried fruits, seeds and nuts. In particular; dates, sunflower seeds, sultanas, currants, raisins, pepitas, almonds, figs and desiccated coconut which are minced and fashioned into a shape.

The Product is a natural product that does not contain any preservatives or added sugars or flavours.

The Product is not baked and none of the ingredients are roasted or cooked in any form.

The Product is marketed as a health/nutrition food snack, and is sold by you predominantly through health food outlets in bulk where it is placed with dried fruits and nuts products.

Relevant legislative provisions

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

38-2

38-3

38-4

Reasons for decision

Food is defined in paragraph 38-4(1)(a) of the GST Act to include food for human consumption whether or not it requires processing or treatment. The Product you supply is considered to be food under this definition.

Section 38-2 of the GST Act states that a supply of food is GST-free, however under section 38-3 of the Act a supply is not GST free if it is a supply of food of a kind specified in the third column of the table in clause 1 of Schedule 1 (the Schedule) of the GST Act, or food that is a combination of one or more foods at least one of which is food of such a kind. If your food is of a kind specified in Schedule 1 it will not be GST-free.

Exempted food items

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 specified in the Schedule, or food that is a combination of one or more foods at least one of which is food of such a kind.

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

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

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

· savoury snacks in particular, 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, meat, seafood or dairy product or extract and whether or not it is artificially flavoured (Item 18 of Schedule 1).

Note that Item 15 and 16 of Schedule 1 includes products such as potato and corn crisps, pork crackling and seeds or nuts that have been processed by salting, smoking, roasting or similar.

Confectionery or food marketed as confectionery

We consider that your food is not intended to be a confectionery item, and is not food marketed as confectionery.

The document Food Industry Partnership - issues register available on the ATO website considers confectionery generally and food marketed as confectionery (at Issue 12).

Confectionery includes items such as chocolate, boiled sweets, lollipops, sherbet, marshmallow and fruit lollies. Confectionery is primarily a small article of a sweet character containing substantial amounts of sugar (per Aickin J, Landau and Anor. v Goldwater and Anor. 13 ALR 192).

Your Product is a natural product made of dried fruit and nuts that has no added sugar, flavour or preservatives. We therefore do not consider that it is confectionery.

We also consider that the other items in the confectionery category are indicative of the types of food that are intended to be excluded from GST-free status. These include items such as crystallised fruit, glace fruit and drained fruit. These can be contrasted to your Product in that they involve higher levels of processing, the addition of sugars and syrups, and also concentrating the products. In contrast, your Product is a natural product that would be expected to have only been subjected to minimal processing.

Furthermore, your Product is not marketed as confectionery. The Product is marketed as a health/nutrition food snack, and is sold by you predominantly through health food outlets in bulk where it is placed with dried fruits and nuts products.

Muesli bars, health food bars, similar foodstuffs

The ATO view on muesli or health bars is provided in GSTD 2008/2. A muesli or health bar is considered to be a commercially-prepared and packaged snack made from a muesli mixture, usually sweetened and set in a bar shape. To be considered a similar foodstuff to these a food must resemble these bars in terms of their physical presentation and ingredients.

A typical muesli bar contains ingredients similar to those found in muesli breakfast cereals, plus additional sugars and other ingredients necessary to achieve a consistency suitable for presentation in bar form. Some muesli bars contain confectionery pieces such as chocolate chips or chocolate, yoghurt or other flavoured coatings.

Your Product contains ingredients, which are similar to some of the ingredients found in health or muesli bars however the main ingredients in these bars usually include cereals or grains in the body of the product together with sugars and other ingredients necessary to 'bind' the product and allow it to be shaped into a bar form. Your Product does not contain cereals or grains and does not have the appearance of a muesli or health bar and is not individually wrapped. Therefore we do not consider your Product to be a muesli bar, health food bar or similar foodstuff.

Savoury snacks

Although your Product is marketed as a snack, it does not have the same characteristics as savoury snacks such as crisps or processed seeds or nuts. Given this, your Product does not meet the requirements to be considered under Item 18 of Schedule 1.

Summary

In these circumstances, your Product is not exempted from being a food for human consumption under 38-3 of the GST Act and consequently, it is a food as defined by subsection 38-4(1) of the GST Act. Hence the supply will be GST-free.