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Edited version of your private ruling
Authorisation Number: 1012660792627
Ruling
Subject: GST and the supply of the product Raw Plant Based Protein powder
Question 1
Would the supply of the product be a GST-free supply if supplied by a GST registered entity?
Answer
No. The supply of the product would not be a GST-free supply if supplied by a GST registered entity. The supply would be taxable.
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 an Australian company and although not presently registered for goods and services tax (GST), the company will be registering for GST shortly. However you do have an Australian Business Number (ABN).
You advise that the product is in powder form.
You advise there are no other treatments applied to this product other than combining the ingredients and packaging them.
You believe that the product is ready for human consumption.
You advise that it is a new product and is consumed to supplement protein in the diet. It is made with no flavouring, additives or preservatives so that it can be readily incorporated when cooking or baking and it can also be added to drinks.
You have provided copies of the product's label.
You intend to sell the product in 500g packages for the convenience of consumers
Your intention is to sell the product online and possibly in some retail outlets in the future.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 9-5
A New Tax System (Goods and Services Tax) Act 1999 Section 38-2
A New Tax System (Goods and Services Tax) Act 1999 Section 38-3
A New Tax System (Goods and Services Tax) Act 1999 Section 38-4
Reasons for decision
Summary
The supply of the product would not be a GST-free supply if supplied by a GST registered entity.
The supply of the product would be taxable as a supplement.
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 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.
Supplements
Supplements (for example dietary supplements) are products that are generally added or mixed with existing food or consumed by mixing with water, juice or other types of liquids. They are also generally taken for therapeutic reasons to prevent or compensate for some real or imagined nutritional deficiency. It is also often the case that a supplement will have its consumption restricted to certain persons, directions that the product must be consumed under supervision or be consumed within a specified amount or dosage.
Given this, while supplements are able to be consumed like food, they are something other than the basic foods envisaged as being GST-free. For this reason, we consider that supplements are not considered to be food for GST purposes under section 38-4 of the GST Act.
We also consider that supplements are not ingredients for food. A product is taken to be an ingredient for food if the product (or some essential element of the product) is an integral part of that food. Something that is sprinkled on top of a food or mixed with the food and is not essential to that food is not considered to be an ingredient, with the food acting merely as a carrier for the supplement. This is because the product retains its own separate identity and does not become an integral part of the food it is added to. Therefore, the product is not considered to be basic food. If the supplement was not added to the food item, the food item would not cease to exist.
Note that supplements marketed as an ingredient for a beverage are also excluded from being GST-free by section 38-3 of the GST Act (with reference to Schedule 2 of the GST Act) unless they are a dry preparation specifically marketed to be mixed exclusively with milk.
Given this, we consider that the product is a supplement and its supply would therefore be taxable under section 9-5 of the GST Act when sold by a GST registered entity.