Edited version of your written advice

Authorisation Number: 1013112988323

Date of advice: 25 October 2016

Ruling

Subject: Goods and services tax (GST) and dessert

Question 1

Are you making a taxable supply when you sell the specified product?

Answer

Yes. You are making a taxable supply when you sell the specified product. Hence, GST is payable on the sale.

Question 2

Are you making a taxable importation of the specified product?

Answer

Yes. You are making a taxable importation of the specified product. Hence, GST is payable on the importation.

Relevant facts and circumstances

You are registered for GST.

You are importing into Australia the specified product in (X sized) packaging.

You provided a copy of the packaging label which describes the specified product. The specified product contains the specified ingredients.

The XX is less than Y% of the total ingredients and is used for a specified purpose. The solid items have a specified consistency.

You promote the specified product as a dessert as most of the time it is consumed after a meal.

You sell the specified product mostly to restaurants/caterers which use it on their menu as desserts. You also sell it to supermarkets and it will probably be displayed in the packaged food section as a dessert.

You do not supply the specified product for consumption on the premises from which you are supplying it.

You provided a recipe which uses the specified product.

You also provided a flowchart of the manufacturing process:

Your contention

You contend that your product is a 'dairy dessert' and GST-free.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 13-5(1)

A New Tax System (Goods and Services Tax) Act 1999 section 13-10

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

A New Tax System (Goods and Services Tax) Act 1999 Division 42

A New Tax System (Goods and Services Tax) Act 1999 Schedule 1

Reasons for decisions

Question 1

Summary

You are making a taxable supply when you sell the specified product because all the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) are satisfied. Hence, GST is payable on the sale.

The supply of the specified product is not GST-free under section 38-2 because the specified product is food of a kind listed in item 20 in the table in clause 1 of Schedule 1 to the GST Act.

Detailed reasoning

GST is payable on any taxable supply that you make.

Section 9-5 of the GST Act sets out the requirements for a supply to be taxable. It states:

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) the supply is made in the course or furtherance of an

*enterprise that you *carry on; and

(c) the supply is *connected with the indirect tax zone; and

(d) you are *registered or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is

*GST-free or *input taxed.

(* Denotes a term defined in section 195-1 of the GST Act)

Indirect tax zone means Australia.

You meet the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. That is:

● you supply the specified product for consideration

● the supply is made in the course or furtherance of an

enterprise that you carry on

● the supply is connected with Australia, and

● you are registered for GST.

There are no provisions of the GST Act under which the sale of the specified product is input taxed.

Therefore, what remains to be determined is whether the sale of the specified product is GST-free.

The relevant provision dealing with GST-free supplies is section 38-2 of the GST Act.

A supply of food that meets the definition of food in section 38-4 of the GST Act is GST-free under section 38-2 of the GST Act unless it is caught by an exclusion in section 38-3 of the GST Act.

Food includes food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act).

The specified product is food for human consumption and satisfies the definition of food under paragraph 38-4(1)(a) of the GST Act.

In accordance with paragraph 38-3(1)(c) of the GST Act, a supply of food of a kind specified in the third column of 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 is excluded from being GST-free under section 38-2 of the GST Act.

Item 20 in the table in clause 1 of Schedule 1 includes XYZ

Item 13 in the Food Industry Partnership - Issues Register on the Australian Taxation Office (ATO) website provides the following guidance on the meaning of 'XYZ'

You contend that the specified product is a 'dairy dessert'. The ATO publication Detailed Food List classifies 'dairy desserts' as GST-free as they are not food of a kind specified in Schedule 1. As stated in the issues register above, 'dairy desserts' are not considered to be XYZ

The term 'dairy desserts', however, is not defined in the GST Act nor is the term defined in the Macquarie or Oxford on-line dictionaries. It is an accepted generic term used by food retailers to describe dessert type products that consist in the main of cream or dairy based ingredients that require constant refrigeration in a stores chiller area and sit alongside and compete against yoghurt type products. The specified product is not such a product and therefore, it is not a 'dairy dessert' for the purposes of classifying the product for GST purposes.

The label contains a 'serving suggestion'.

A complete dessert is normally comprised of solid items in a particular type of sauce (sauce Y).

However, despite this, we consider that a product consisting of the solid items in sauce X has the characteristics of a XYZ dessert in its own right even without sauce Y. The product is similar to versions of a particular dish, which is a dessert comprising of solid items in sauce X.

The serving suggestion on the label of your product is just a suggestion and it does not characterise the product. Your product could be eaten as a dessert as is. Sauce Y and other additions are optional extras.

As the specified product is covered by item 20, it is excluded from being GST-free under section 38-2 of the GST Act pursuant to paragraph 38-3(1)(c) of the GST Act. Therefore, as all of the requirements of section 9-5 of the GST Act are met, you are making a taxable supply and GST is payable on your sale of the specified product.

Question 2

GST is payable on taxable importations.

You make a taxable importation if you meet the requirements of subsection 13-5(1) of the GST Act, which states:

You make a taxable importation if:

(a) goods are imported; and

(b) you enter the goods for home consumption (within the

meaning of the Customs Act 1901).

However, the importation is not a taxable importation to the extent

that it is a *non-taxable importation.

Section 13-10 of the GST Act defines non-taxable importation. It states:

An importation is a non-taxable importation if:

(a) it is a non-taxable importation under Part 3-2; or

(b) it would have been a supply that was GST-free or input taxed if it had been a supply.

You import the specified product for use in Australia.

The importation of the specified product is not a non-taxable importation under part 3-2 of the GST Act.

As the sale of the specified product is not GST-free or input taxed under any provision of the GST Act, the importation is not a non-taxable importation pursuant to paragraph 13-10(b) of the GST Act.

As you import the specified product and it is not a non-taxable importation, GST is payable on your importation of the specified product.