Edited version of private advice

Authorisation Number: 1012629635745

Ruling

Subject: GST and food products

Question 1

Will your supply of the various varieties of the food product be GST-free?

Answer

Yes.

Relevant facts and circumstances

• You are registered for GST.

• You supply to retail outlets a food product.

• The food products are not eaten on your premises.

• You promote your food product as a snack and a great addition to school lunch boxes or can be eaten as an after dinner healthy dessert.

• The food products are nutritional, gluten free made up of various raw ingredients. The food products are gluten and dairy free and have no added sugars or flavours and have no coating.

• No cooking is involved in the manufacturing of the food products.

• The food products are sold in bulk and usually packaged in a small box for delivery.

• The food products are sold as a nutritional snack and not marketed 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

Summary

Your supply of the different varieties of the food product is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). It is a supply of food, and is not excluded from being GST-free by section 38-3 of the GST Act.

Detailed reasoning

Food is defined in paragraph 38-4(1)(a) of the GST Act to include food for human consumption whether or not it requires processing or treatment. In your case, you sell a 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.

Section 38-2 of the GST Act states that a supply of food is GST-free, however under section 38-3 of the Act a supply is not GST-free if it is a supply of food of a kind specified in the third column of the table in clause 1 of Schedule 1 (the Schedule) of the GST Act, or food that is a combination of one or more foods at least one of which is food of such a kind. If your food is of a kind specified in Schedule 1 it will not be GST-free.

Schedule 1 includes the following food items that may be of relevance when considering the GST treatment of your supply of the food 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.

Confectionery includes items such as chocolate, boiled sweets, lollipops, sherbet, marshmallow and fruit lollies. Confectionery is primarily a small article of a sweet character containing substantial amounts of sugar (per Aickin J, Landau and Anor. v Goldwater and Anor. 13 ALR 192).

Your food product is a natural product made of raw ingredients. The food product has no added processed sugars or other sweetening agents. They are not small to be considered a delicacy. Given this, we do not consider that the food products are a food that is of a kind to confectionery (albeit they are not marketed as such).

We also consider that the other items in the confectionery category are indicative of the types of food that are intended to be excluded from GST-free status. These include items such as crystallised fruit, glace fruit and drained fruit. These can be contrasted to your products in that they involve higher levels of processing, the addition of sugars and syrups, and also concentrating the products. In contrast, your products are natural products that would be expected to have only been subjected to minimal processing.

Furthermore, your products are not marketed as confectionery. The products are labelled and marketed as a natural fruit snack.

We consider that your food is not intended to be a confectionery item, and is not food marketed as confectionery.

Muesli bars, health food bars, similar foodstuffs

The ATO view on muesli or health bars is provided in Goods and Services Tax Determination GSTD 2008/2. A muesli or health bar is considered to be a commercially-prepared and packaged snack made from a muesli mixture, usually sweetened and set in a bar shape. To be considered a similar foodstuff to these a food must resemble these bars in terms of their physical presentation and ingredients.

A typical muesli bar contains ingredients similar to those found in muesli breakfast cereals, plus additional sugars and other ingredients necessary to achieve a consistency suitable for presentation in bar form. Some muesli bars contain confectionery pieces such as chocolate chips or chocolate, yoghurt or other flavoured coatings.

Your product contain ingredients, which are similar to some of the ingredients found in health or muesli bars however 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 does not contain cereals or grains and does not have the appearance of a muesli or health bar and is not individually wrapped. Therefore we do not consider your product to be a muesli bar, health food bar or similar foodstuff.

Savoury snacks

Although your food products are marketed as a snack, they do not have the same characteristics as savoury snacks such as crisps or processed seeds or nuts. Given this, the products do not meet the requirements to be considered under Item 18 of Schedule 1.

Summary

Our view is that your food products are not confectionery within the terms of the Schedule, nor are they a health food bar or savoury snack. The products are therefore a supply of food, and food of a kind that is not excluded from being GST-free by section 38-3 GST Act. Therefore the supply of your different varieties of the food product is GST-free.