Edited version of your private ruling

Authorisation Number: 1012437311952

Ruling

Subject: GST and food

Question

Is your importation of two products (Products) subject to goods and services tax (GST)?

Answer

Yes.

Relevant facts and circumstances

· You are registered GST.

· You import X Products.

· You sell the X Products to food manufacturers. You do not make retail sales.

· The Products are used almost exclusively as sweetening agents for food for human consumption.

· You have provided information of a product that is a blend of Products and which is sold by a manufacturer of food sweeteners. This information shows that the blend provides some carbohydrates solely as a result of one of the Products. The information further shows that there is no measurable nutrition being provided by either Product in the form of energy, fats or proteins.

· Various websites show that the Products:

o are not metabolised by the human body and are passed through it unchanged (including the carbohydrates)

o provide no measurable nutritional value.

· Australian Customs are levying GST on your importation of the Products.

Relevant legislative provisions

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

Section 38-2

Section 38-3

Section 38-4.

Reasons for decision

To determine if the importation of the Products is non taxable, it is first necessary to consider how the supply of the Products would be treated for GST purposes if supplied in Australia.

The only provision in the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) that may allow your supply of the Products to be GST-free is as a supply of food. Food is GST-free under section 38-2 of the GST Act however the food 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 only relevant foods to your circumstances are given at paragraph 38-4(1)(e) which provides for food additives (goods to be mixed with or added to food for human consumption including condiments, spices, seasonings, sweetening agents and flavourings).

In your case, the Products are used principally as sweeteners in food for human consumption and are therefore food additives. They therefore satisfy the meaning of food.

Food items subject to GST

As mentioned above, food is GST-free only where it is not excluded from being GST-free by section 38-3 of the GST Act. The only applicable provision of section 38-3 of the GST Act to consider is paragraph 38-3(1)(e). This paragraph provides that a supply of food is subject to GST if it is stated as such in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations).

Regulation 38-3.02 of the GST Regulations applies specifically to food additives and establishes those additives that are subject to GST. In particular, sub-regulation 38-3.02(1) of the GST Regulations states that only those food additives that are not exempt food additives will be subject to GST. The term 'exempt food additive' is then defined in sub-regulation 38-3.02(2) of the GST Regulations to mean:

· a food additive which, at the time of supply is packaged and marketed for retail sale, or

· a food additive which, at the time of supply:

o has a measurable nutritional value

o is supplied for use solely or predominantly in the composition of food, and

o is essential to the composition of that food.

As the Products are not packaged and marketed for retail sale at the time of the supply, we can only consider the second dot point to determine if the Products are an exempt food additive and therefore GST-free under section 38-2 of the GST Act when supplied.

Measurable nutritional value

You have provided nutritional information of a product that is a blend of the Products and which is sold by a manufacturer of food sweeteners. This information shows that the blend provides some carbohydrates solely as a result of one of the Products. The information further shows that there is no measurable nutrition being provided by either Product in the form of energy, fats or proteins.

Further to this, various websites show that the Products:

· are not metabolised by the human body and are passed through it unchanged (including the carbohydrates), and

· provide no measurable nutritional value.

Given the information that is available, we have to conclude that the Products do not have any measurable nutritional value.

As they have no measurable nutritional value, the Products cannot meet all the requirements to be an exempt food additive. However, the other elements are considered for the sake of completeness.

Supplied solely or predominantly in the composition of food

Your sales are made to manufacturers of food sweeteners who then use the products solely or predominantly to make sweeteners for human consumption. Therefore both Products satisfy this condition.

Essential to the composition of food

We consider that sweeteners may be essential to many foods and therefore we consider the Products could satisfy this condition.

Not exempt food additives

As a result of not satisfying all of the above conditions, the Products cannot be considered as exempt food additives. Consequently, they are prevented from being GST-free under paragraph 38-4(1)(e) of the GST Act and will therefore be taxable under section 9-5 of the GST Act when supplied in Australia.

We note that, under different circumstances, a manufacturer may sell a product as a GST-free supply where the product is a blend of the Products. For example, it may be that they are making retail sales thus making their supply GST-free under the first dot point of sub-regulation 38-3.02(2) of the GST Regulations.

Not a 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).

The importation of the Products is not GST-free under the second dot point as the supply would not have been a supply that was GST-free if it had been made in Australia.

Australian Customs apply GST to your importation of both Products as they have also determined that Part 3-2 of the GST Act cannot be applied to your importation. Part 3-2 concerns itself with the Customs Tariff Act 1995, the administration of this Act being the responsibility of Australian Customs.