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Ruling

Subject: GST and food

Questions

Would the supply of the food product (Product) be GST-free under Subdivision 38-A of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) if supplied in Australia?

Is the importation of the Product non-taxable under section 13-10 of the GST Act?

Answers

Yes.

Yes.

Relevant facts and circumstances

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

You are the representative member of a GST group.

Your group member imports the Product from a supplier.

The Product is packaged in plain cartons. The label on each carton contains basic information but does not have how the Product should be used. The importation does not come with any literature or instructions.

The Product is something that can be sold as confectionery or used in making confectionery.

You or your group member do not promote or sell the Product as a separate food product but use the Product in your manufacturing processes.

Relevant legislative provisions

All references are to the GST Act:

Section 13-10

Subdivision 38-A

Section 38-2

Section 38-3

Section 38-4.

Reasons for decision

The only provision in the GST Act that may allow the supply of the Product to be GST-free is as a supply of food which is GST-free under section 38-2 of the GST Act. The food, however, must not come within any of the exclusions listed in section 38-3 of the GST Act.

Subsection 38-4(1) of the GST Act defines food for the purposes of section 38-2 of the GST Act. Of the foods defined in this provision, the most relevant to this type of product would be paragraph 38-4(1)(b) which provides for ingredients for food for human consumption.

The Product is fit for human consumption and would be sold and used as an ingredient for food for human consumption. Hence, the Product is a food, the supply of which can be treated as being GST-free, provided it is not excluded under section 38-3 of the GST Act.

Excluded food items

The only relevant exclusion given in section 38-3 of the GST Act is paragraph 38-3(1)(c).

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 table in clause 1 of Schedule 1 to the GST Act (Schedule 1), or 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 item that may be of relevance when considering the GST treatment of a 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).

The ATO view on the GST treatment of various food products is provided by the Food Issues Register (available from the ATO website www.ato.gov.au). Of importance are Issues 12 and 29 which discusses the GST treatment of confectionery.

Confectionery

Issues 12 and 29 provide that when considering products under Item 8 of Schedule 1, your Product can be confectionery for GST purposes. However in this case, the Product is made in such a way that would differentiate it from being confectionery and is more suited to use as an ingredient for other food products. Consequently, we consider that the Product is not confectionery for GST purposes.

Food marketed as confectionery

Issues 12 and 29 also provided the following factors to assist in determining whether the Product is confectionery.

· the name of the goods;

· the price of the goods;

· the labelling on any containers for the goods;

· literature or instructions packed with goods;

· how the goods are packaged;

· how the goods are promoted or advertised; and

· how the goods are distributed.

In this case, the Product is marketed as an ingredient (having the ingredients listed on the carton) and not as confectionery. The Product comes in plain packaging, having no specific statement as to its intended use, and doesn't come with any literature or instructions. Given this, the Product cannot be considered as being marketed as confectionery.

Food marketed as ingredients for confectionery

The Product is not marketed as an ingredient specifically for confectionery and can be used in the manufacturing process of other foods, these other foods not being restricted or limited to confectionery items. Consequently, the Product cannot be considered as principally being an ingredient for confectionery.

Given these circumstances, we consider that the Product does not fall under Item 8 of Schedule 1. Consequently, the Product is a food as defined by subsection 38-4(1) of the GST Act and its supply would be GST-free.

Non taxable importation

Section 13-10 of the GST Act provides that an importation is non-taxable if:

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

· 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 this case, the supply of the Product in Australia would be GST-free and consequently, your group member's importation of the Product is non-taxable under section 13-10 of the GST Act.