Edited version of your private ruling

Authorisation Number: 1012616018523

Ruling

Subject: GST and food classification

Question 1

Is the food product subject to goods and services tax (GST)?

Answer

No

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

• You are a company registered for GST.

• You carry on an enterprise of manufacturing ready-to-consume food products.

• You have, in the past, sought private binding rulings to confirm the GST treatment of various products

• You plan to launch a new food product, which is very similar to the other food products in the marketplace.

• You have not identified any products currently in the market that are identical to the food product.

Ingredients

• The ingredients in the food product comprise fruit puree and juices and one other main ingredient will also contain very small amounts of pectin (a gelling agent), citrus fibre, natural flavours and colours.

• The food product will be sold in a number of flavours.

• No processed sugars or artificial sweeteners will be added to the product (as indicated in the ingredients list above). Any sweetness in the food product is naturally occurring from the fruit content.

Manufacturing process

• The food product will be manufactured through the following steps:

• The fruit content is blended and concentrated, with the addition of the gelling agent and flavours, and puffed rice (made from rice flour only) suspended in the mass.

• The mass is cooled, slabbed and cut into individual pieces.

• Each individual piece is then dusted with citrus fibre to prevent clumping, wrapped, and packed into boxes containing a number of the food product.

Marketing

• The food product will be sold alongside other fruit snack products currently in the market, which are usually found in the health food aisle.

• Your research indicates that supplies of these similar fruit snack products are currently being treated as GST-free.

Relevant legislative provisions

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

Section 38-2

Section 38-3

Paragraph 38-3(1)(c)

Section 38-4

Paragraph 38-4(1)(a)

Schedule 1 - Items 8, 11 & 12

Reasons for decision

Note:

You have referred to a number of previously issued private rulings from the Register of Private Binding Rulings in your submission to the ATO. However we advise that although you may believe that the facts and decisions in those cases support your argument that the food product is GST-free we cannot comment on advice given to other taxpayers due to privacy considerations.

The rulings in the Register have been edited and may not contain all the factual details relevant to each decision.

Summary

The supply of the food product is not excluded from being GST-free under Schedule 1 of the GST Act. Accordingly, a supply of the food product is a GST-free supply under section 38-2 of the GST Act

Detailed reasoning

A supply of food is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (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 paragraph 38-4(1)(a) of the GST Act to include food for human consumption (whether or not requiring processing or treatment).

However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1), or food that is a combination of one or more foods at least one of which is food of such a kind.

In this case, we need to consider whether the product falls into items 8, 11 or 12 of the Schedule 1 to the GST Act.

Item 8 of Schedule 1 (Item 8) operates to subject confectionery, food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery to GST.

No processed sugars or artificial sweeteners will be added to the product through the manufacturing process. Any sweetness in the food product is naturally occurring from the fruit content.

We also do not consider that the food product is food marketed as ingredients for confectionery, i.e. the food product is marketed as a natural fruit snack. Given that they do not contain 'substantial amounts of sugar', we do not consider that the food product consists principally of confectionery. Accordingly, item 8 of Schedule 1 of the GST Act does not apply

The food product will also not be marketed as confectionery or ingredients for confectionery. Consequently we do not consider that the food product has the nature or quality of confectionery.

The food product does not contain ingredients, which are similar to some of the ingredients found in health or muesli bars. The main ingredients in these bars usually include cereals or grains in the body of the product together with sugars and other ingredients necessary to 'bind' the product and allow it to be shaped into a bar form. Your product consists mainly of fruit and fruit puree and one other main product and does not have the appearance of a muesli or health bar and we do not consider your product to be a muesli bar, health food bar or similar foodstuff.

Consequently we do not consider that the food product has the nature or quality of confectionery.

Item 11 of Schedule 1 (Item 11) operates to subject 'food known as muesli bars or health food bars, and similar foodstuffs' to GST. The food product does not contain ingredients, which are similar to some of the ingredients found in health or muesli bars. The main ingredients in these bars usually include cereals or grains in the body of the product together with sugars and other ingredients necessary to 'bind' the product and allow it to be shaped into a bar form. Your product consists mainly of fruit and fruit puree and one other main product and does not have the appearance of a muesli or health bar and we do not consider your product to be a muesli bar, health food bar or similar foodstuff.

Item 12 of Schedule 1 (Item 12) operates to subject crystallised fruit, glace fruit and drained fruit to GST. The food product is not 'crystallised fruit, glace fruit or drained fruit' for the purposes of item 12 of Schedule 1. The food product has the consistency of dried fruit and is not a fruit product as listed in Item 12. The food product does not contain any added sugar (as a preservative or otherwise), Accordingly, item 12 of Schedule 1 of the GST Act does not apply.

Therefore, the supply of the food product is not excluded from being GST-free under Schedule 1 of the GST Act. Furthermore, the supply is not excluded from being GST-free under any of the other paragraphs in section 38-3 of the GST Act. Accordingly, a supply of the food product is a GST-free supply under section 38-2 of the GST Act.