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Edited version of your private ruling
Authorisation Number: 1012534022750
Ruling
Subject: GST and food
Question
Will your sale of a product (Product) be subject to goods and services tax (GST)?
Answer
No.
Relevant facts and circumstances
· You are registered for GST.
· You are to sell the Product to retail outlets.
· The Product is a certain type of plant that is grown hydroponically in trays that contain a non-soil based inert growing media.
· After a period of growth the trays are removed from the hydroponic system and are allowed to drain. The base is wiped off and the trays are then placed in other containers.
· The containers are then date-coded, labelled, packed into boxes, refrigerated and then distributed to retail outlets for sale.
· The use of the containers optimises the plants' presentation and appearance.
· The trays optimise the remaining shelf life of the plants through the small amount of residual moisture left in the inert growing media.
· Your tests show that the shelf life of the plants once removed from the hydroponic system to be a certain number of days but this shelf life can also be dependent on transport and storage conditions.
· The Product will be sold in the retailers' fresh produce sections.
· The Product is designed so as to allow the end consumer to dispose of the trays and inert growing media once the plants have been consumed.
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 is GST-free as food under section 38-2 of the GST Act if what is being supplied 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 ingredients for food for human consumption, but excludes (at paragraph 38-4(1)(i)) plants under cultivation that can be consumed (without being subject to further process or treatment) as food for human consumption.
The Product is to be sold principally as ingredients for human consumption and consequently can be treated as food for GST purposes, unless they can also be classified as plants that are under cultivation.
There are no exclusions listed in section 38-3 of the GST Act that would apply to this product or its supply so this provision will not be discussed further. Therefore, it is only necessary to determine whether the Product is a plant that is under cultivation when supplied by you.
Plants under cultivation
The words 'plants under cultivation' are not defined for GST purposes so therefore are to be afforded their ordinary dictionary meaning.
The Macquarie Dictionary 3rd Edition defines plant as
…
2. a herb or other small vegetable growth, in contrast to a tree or shrub.
…
Further, cultivate is defined as
…
3. to promote or improve the growth of (a plant, etc) by labour and attention.
…
With reference to these definitions, we consider that your Product will not be, at the time of your supply, plants that are under cultivation as:
· the plants will be removed from the hydroponic system before the time of your supply, this system being the only way the plants can receive nutrients and a continuous supply of water
· the inert growing media in which the plants are supplied provides no ongoing nutrients for them to grow
· there is also no soil around the plants to provide nutrients
· once the plants are removed from the hydroponic system, no further nutrients are added or applied to promote or improve the growth of the plants
· the plants only survive in the containers for a certain number of days after they are removed from the hydroponic system with shelf-life being only marginally improved as a result of supplying the herbs in the inert growing media.
Further to this, hydroponically grown plants supplied in the manner in which you will supply your Product can be differentiated from plants which are in soil at the time of their supply. Plants which are supplied in soil are generally purchased with the view that they will continue to produce food the future. In contrast, the Product can only survive for a certain number of days after they are removed from the hydroponic system.
We also consider that the Product is no different in character to other plants that are sold with their roots still attached and which are supplied GST-free. In both cases, although the roots are attached, they do not receive the necessary nutrients required to live and grow. Also in both cases the plants will perish after a certain number of days.
Therefore, the exclusion at paragraph 38-4(1)(i) of the GST Act does not apply and consequently, the Product will be a GST-free supply of food under section 38-2 of the GST.