Edited version of your private ruling

Authorisation Number: 1012515626592

Ruling

Subject: GST and food

Question

Would your supply of the food product (Product) be GST-free if you were to register for goods and services tax (GST)?

Answer

No.

Relevant facts and circumstances

· You are not registered for GST but have an Australian business number.

· You supply the Product to retail outlets.

· The Product is made up of various raw ingredients and held together by a certain fruit paste. The Product also has no added sugars or flavours and no coating.

· No cooking is involved in the manufacturing of the Product.

· The Product is sold in bulk and usually packaged in a small box for delivery.

· The Product is refrigerated before being sold to maintain their freshness.

· The Product is sold as a nutritional snack and not as confectionery or as a prepared meal.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

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 GST Act if it satisfies the definition of food in section 38-4 of the GST Act and it is not excluded by section 38-3 of the GST Act.

Food is defined in section 38-4 of the GST Act to include food for human consumption (paragraph 38-4(1)(a)). In your case, you sell the Product to retail outlets as food for human consumption and hence your Product can be treated as food under section 38-4 of the GST Act.

The 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)

· 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).

Confectionery or food marketed as confectionery

The ATO view on confectionery items is provided by Issue 12 of the Food Industry Partnership - Issues Register (available on the ATO website). Issue 12 considers confectionery generally and food marketed as confectionery.

Issue 12 highlights the High Court case Landau and Anor. v Goldwater and Anor. (13 ALR 192) and gives gave a general description of confectionery as follows:

"one of common usage which embraces a wide variety of articles, many readily recognisable as examples of confectionery. They are primarily small articles of a sweet character containing substantial amounts of sugar and regarded as being in the nature of a delicacy in whatever quantity they may be consumed. There is, however, no doubt that in the ordinary parlance the term would now include blocks of chocolate, however small or however large."

Your Product is a natural product made of various ingredients. The Product has no added processed sugars or flavours but nevertheless would be sweet and flavoursome as a result of the ingredients. They are also small and can therefore be considered a delicacy. Given this, we consider the Product is a food that is of a kind to confectionery (albeit it is not marketed as such).

Note that the GST legislation does not take into account that the majority of the ingredients making up the Product are GST-free. For GST purposes, the resulting Product is a different product from its ingredients. This is similar to sandwiches where the ingredients are GST-free but a sandwich is taxable.

Consequently, as the Product is capture by Item 8 of Schedule 1, your supply of the Product would be taxable were you to register for GST.

As the Product can be considered as a confectionery, we will not explore whether it can also be considered as muesli bars or savoury snacks.