Edited version of your private ruling

Authorisation Number: 1012468959624

Ruling

Subject: GST and mixed or composite supplies

Questions

1. Can the supply of each product as outlined in the facts be treated as a composite supply and hence GST-free as food?

2. Will the importation of the products be non taxable?

Answers

1. Yes.

2. Yes.

Relevant facts and circumstances

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

· You are to import and sell food products.

· The products include in their price a particular type of metal utensil.

· The cost breakdown shows that the cost of a utensil is less than $3.00 and 20% of the total cost of the product.

· The products could be imported with a plastic utensil at a future date.

Relevant legislative provisions

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

Section 13-10

Section 38-2

Part 3-2.

Reasons for decision

Mixed and composite supplies

The Australia Taxation Office's (ATO) view on mixed and composite supplies is provided by the goods and services tax public ruling GSTR 2001/8 (available from the ATO website). This ruling provides that a mixed supply is a supply that contains separately identifiable taxable and non-taxable parts.

A composite supply on the other hand is a supply that contains, or appears to contain, several parts that may objectively be treated as if they are simply a supply of a single thing. The terms used in GSTR 2001/8 in describing subordinate parts of a composite supply include 'incidental', 'integral' and 'ancillary'. In other words, a composite supply is a supply of one dominant part that has other parts that are not treated as having a separate identity given they are only integral, ancillary or incidental to the dominant part of the supply.

In your case, you are to import and sell food products that include in their price a particular type of utensil. The cost breakdown shows that the cost of a utensil is less than $3.00 and 20% of the total cost of the product.

A utensil is clearly an identifiable part of the supply that could be sold in its own right. However, to minimise compliance costs, paragraph 60 of GSTR 2001/8 allows a supplier to treat a supply having separately identifiable parts as a composite supply (albeit that it might otherwise be considered as a mixed supply) provided the taxable part does not exceed the lesser of:

· $3.00, or

· 20% of the consideration of the total supply.

Note that it does not necessarily mean that if the above thresholds are not met that a supply is not composite. In these situations it is necessary to apply the rationale given in paragraph 59 of GSTR 2001/8.

The cost breakdown shows that the cost of a utensil is less than $3.00 and 20% of the total cost of the product. This will also be the case once you apply your mark-up for the Australian market. Thus, in applying paragraph 60 of GSTR 2001/8 to your sale of each product, you would be entitled to treat the supply of each products as a composite supply; with the dominant part of the supply being food (which would be GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999).

Plastic utensil

You are also entitled to apply the test from paragraph 60 of GSTR 2001/8 to your sales where the utensil is plastic. Given the plastic utensil is likely to have a lower value than the metal utensil; you would again have a composite supply with the dominant part of the supply being the food.

Non taxable importation

Section 13-10 of the GST Act provides that an importation is a non-taxable importation 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 your case, your supply of the two products in Australia will be GST-free and consequently, your importation will be non-taxable under section 13-10 of the GST Act.