Edited version of your private ruling

Authorisation Number: 1012588201263

Ruling

Subject: GST and food

Question

Will your sale of a particular product (Product) be taxable?

Answer

Yes.

Relevant facts and circumstances

· You are registered for GST.

· You are to sell the Product.

· The Product is comprised of a particular food type that that has been mixed with certain ingredients (including salt) and is then dried to make it crunchy.

· The Product is marketed as having two uses, one of which is as a crunchy snack. Each packet of the Product is a bite-size portion.

Relevant legislative provisions

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

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 A New Tax System (Goods and Services Tax) 1999 (GST Act) if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free 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 (whether or not requiring processing or treatment). The Product is food for human consumption and therefore, it satisfies the definition of food given in section 38-4 of the GST Act.

However, 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). Of importance is Item 18 of Schedule 1 (Item 18) which provides for food that is food of a kind to those foods covered by Items 15 and 16 of Schedule 1 (Items 15, 16). Item 18 includes foods that consist wholly or partly of any vegetable, herb, fruit, meat, seafood or dairy product or extract and whether or not they are artificially flavoured. The Product is comprised of a particular food that is listed in Item 18.

Items 15 and 16 are described in Schedule 1 under the general heading of savoury snacks and include food such as potato crisps, sticks or straws, corn crisps or chips, bacon or pork crackling or prawn chips. They also include seeds or nuts that have been treated by salted, spicing, smoking, roasting or in any other similar way.

These foods are similar in that they have undergone a cooking process and share certain other characteristics such as crispness. Some of these products are also seasoned with salts to sharpen their flavour and to make them more-ish.

In this case, the Product is comprised of a particular food type that that has been mixed with certain ingredients (often used to provide flavouring to a food) and is then dried to make it crunchy. The Product is also marketed as a crunchy snack and comes in bite-size portions. Hence, it possesses many of the characteristics of the foods covered by Items 15 and 16. Given this, the Product is food of a kind specified in Item 18 as they are food of a kind to those foods covered by Items 15 and 16.

Further to this, the Product can be distinguished from foods in the class of dried fruit due to the cooking and flavouring process used in their manufacture. Dried fruits are dried to varying extents but do not exhibit other similarities to the foods covered by Items 15 and 16. Accordingly, the Product is food of a kind covered by Item 18 and your supply of the Product will be excluded from being a GST-free supply by the operation of paragraph 38-3(1)(c) of the GST Act. Consequently, it will be taxable under section 9-5 of the GST Act.

Other use

The Product is also marketed as having another use other than a snack, possibly making the supply of the Product GST-free under section 38-2 of the GST Act.

In deciding the GST treatment of a food product, it is worth referring to the Federal Court case Lansell House Pty Ltd & Anor v FC of T 2010 ATC 20-173 (Lansell). In Lansell, it was necessary to determine if a product labelled as dried bread (a GST-free product) also had the characteristics to be considered a cracker biscuit (a taxable product). In making this determination, Lansell recognised that a food product may have characteristics to allow it to be classified into more than one food category. However, Lansell further provides that for GST purposes, a food product can only have one classification and this classification should be based on the product's characteristics.

In coming to its decision, Lansell also considered (amongst other things) the product's:

· use

· in store display

· marketing

· tax treatment in the country of manufacture, and

· appearance.

In this case, the Product has the characteristics that clearly identify it more as a snack. It is marketed as a snack and has the characteristics of those foods covered by Items 15 and 16. Following the guidance provided by Lansell, the Product should be treated for GST purposes as a food that is food of a kind to savoury snacks.

Note that where a product is supplied as a taxable food, the fact that it could be used for a GST-free purpose does not change the GST status of the product supplied.