Edited version of your written advice

Authorisation Number: 1012703335128

Ruling

Subject: Food classification

Question

Is the supply of the food product GST free?

Advice

Yes

Relevant facts and circumstances

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

• You carry on an enterprise of retailing food products.

• The food products are produced by puffing the grains using heat and high pressure. The food products are not baked or fried.

• The packaging describes the product as crunchy snack with a light flavour.

• The product has been promoted as a healthy food product.

• The main ingredients for food product are grains.

• The other ingredients are flavour seasoning, salt, sugar, etc.

• You advised that the food product is displayed in the health food section in your store.

Reasons for decision

A supply of food is GST-free under section 38-2 of the 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) (paragraph 38-4(1)(a) of the GST Act). As the food product is food for human consumption, they satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act.

However, section 38-3 of the GST Act specifies foods that are not GST-free. The relevant paragraph which may apply to the food product is paragraph 38-3(1)(c) of the GST Act. The paragraph provides that 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).

Food product

The food products are grain cakes and they are made of high% of puff grains. The food product in this ruling application is flavoured. The ingredients for the food product are rice, seasoning, etc. They are produced by puffing the grains using heat and high pressure. The food product is not baked or fried.

You advised that the food product is displayed in the health food aisle along with other health food like breakfast cereals and muesli bars.

Food classification of food product

The term 'grain cake' is defined in the Dictionary as follows:

1.  a flat disc of puffed grain, sometimes seasoned, eaten as a snack.

The food product satisfies the meaning of grain cake in the Dictionary. The food product is grain cakes. It contains high% of puff grains and has a flavour. They are marketed as healthy snack food.

ATO view

The ATO views on grain cakes and crackers are outlined in the Detailed Food List as follows:

Is the food listed in item 32 (Biscuit goods)?

Item 32 of Schedule 1 (item 32) covers foods that consist principally of biscuits, cookies, crackers, pretzels, cone or wafers. Grain crackers are food of a kind listed in item 32 as they display characteristics of biscuit foods.

The word 'biscuits' is defined in the Macquarie Dictionary 3rd Edition as follows:

"1a a stiff, sweet mixture of flour, liquid, shortening and other ingredients, shaped into small pieces before baking or sliced after baking, b a savoury, unleavened similar mixture, rolled, sliced and baked crisp".

However, the food product is made principally from compressed cereal and is considered to be different from biscuits and grain crackers. Unlike the biscuits and crackers, the food product is not baked. They are produced by puffing the grains using heat and high pressure and therefore are not foods listed in item 32. Grain crackers are food of a kind listed in item 32 where the product displays characteristics of biscuit foods.

Is the food listed in item 20 (Bakery products - cakes)?

Although the food product is promoted as grain cakes, we consider the food product are not food of a kind listed under item 20 of Schedule 1 (item 20). The food product are made from puffed grains using heat and high pressure and the ingredients for food product are different from ingredients for making food listed in item 20.

Is the food listed under item 18 (Savoury snacks - crisps, processed seeds or nuts)?

Item 18 of Schedule 1 (item 18) states:

food similar to that covered by item 15 or 16, 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

Therefore for a food to be listed in item 18, a food needs only to be "similar" to foods that are listed in item 15 or item 16 of Schedule 1. The word "similar" is not defined in the GST Act and therefore takes on the ordinary meaning. The meaning of "similar" is defined in the Macquarie Dictionary (Dictionary) as:

having likeness or resemblance, especially in a general way

Therefore, the grain crackers/chips are listed in item 18 where they display likeness or resemblance in a general way to foods listed in item 15 or item 16 of Schedule 1.

Item 15 of Schedule 1 includes potato crisps, sticks or straws, corn crisps or chips, bacon or pork crackling or prawn chips.

Item 16 of Schedule 1 includes seeds or nuts that have been processed or treated by salting, spicing, smoking or roasting, or in any other similar way.

An example of a food that is listed in item 18 which is similar to food listed in item 15 is banana chips. The explanation is outlined in ATOID 2003/1142 and it states:

Banana chips are thin, sliced discs in the form of chips and are cooked in oil so that they are crisp and crunchy. They are generally supplied and labelled as banana 'chips'. Banana chips possess many of the characteristics of the foods specified in Item 15 and are therefore, similar to those foods.

Furthermore, banana chips 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 listed in Item 15. Accordingly, banana chips are food of a kind covered by Item 18 …

Therefore foods listed in item 18 would generally possess many of the characteristics of the foods specified in Item 15, such as being thin, sliced in the form of chips, sticks or straws and cooked so that they are crisp and crunchy, etc.

The food products are not foods that displays likeness or resemblance to foods listed in item 15. The food product is not thin sliced chips as they are grain cake snacks. Unlike food such as banana chips (where they are cooked in oil to make the food crisp and crunchy), the food products are produced by puffing the grains using heat and high pressure. As a result the food products are crunchy but are not crisp like those foods listed in item 15. The food products are not in the form of seeds or nuts and therefore are not similar to foods listed under item 16.

Therefore, the food products are not foods listed in item 18.

As the food products are not listed in Schedule 1, they are therefore not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act