Edited version of your private ruling

Authorisation Number: 1012536328859

Ruling

Subject: GST and food

Question

Is your supply of a product (Product) GST-free?

Answer

No. The supply of the Product is taxable.

Relevant facts and circumstances

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

· You sell the Product.

· The Product comprises entirely of an item that is also sold as confectionery.

· The Product is being sold as an ingredient for food

· There are no recipes on the packaging on how the Product should be used.

· You do not sell the Product alongside confectionery items.

Relevant legislative provisions

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

Section 9-5

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 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 food for human consumption (paragraph 38-4(1)(a)) or ingredients for food for human consumption (paragraph 38-4(1)(b)). In your case, you sell the Product as an ingredient for food for human consumption. Hence, the Product can be treated as food for GST purposes.

Note that how a particular item meets the requirements of section 38-4 of the GST Act is not of importance when applying section 38-3 of the GST Act. Although an item may meet the requirements to be treated as food for GST purposes, the item will only be GST-free if it is then not excluded from being GST-free by section 38-3 of the GST Act. Given this, it is necessary to determine if the Product is excluded by section 38-3 of the GST Act.

Foods excluded from being GST-free

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 item 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)

In this case, the Product comprises entirely of an item that is also sold as confectionery, the supply of which would be taxable. This is confirmed in the Detailed food list, a publication which is available on our website and which provides details of the GST status of major food and beverage product lines. This publication has the status of a public ruling for GST purposes.

Given this, the Product can be considered as being food that consists principally of confectionery. As such, the product is captured by Item 8 of Schedule 1 and hence taxable under section 9-5 of the GST Act

Cooking / baking chocolate

You have mentioned in your application that cooking / baking chocolate is GST-free because it is classified as an ingredient for food.

However, cooking / baking chocolate, like the Product, would also be taxable if it were excluded from being GST-free by section 38-3 of the GST Act.

Cooking / baking chocolate is not excluded by this section because it is not normally considered to be confectionery or food that is of a kind to confectionery due to its ingredients and taste. It is also not usually considered to be an ingredient for confectionery as it is not normally principally marketed as such and can be used as an ingredient in a multitude of food products.

However, cooking / baking chocolate that is actually confectionery or food marketed as confectionery will be excluded from being GST-free by section 38-3 of the GST Act.