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Edited version of your written advice
Authorisation Number: 1051321666921
Date of advice: 11 January 2017
Ruling
Subject: GST and the importation of a product canister
Question
Is your importation of a product canister (product) that are used in the manufacturing of food a taxable importation?
Answer
No. Your importation of the product is a non-taxable importation.
Relevant facts and circumstances
You are registered for GST.
You import then sell the product.
The Product is marketed and packaged principally as a product to be added to a food during its manufacturing process.
The Product (and identical products) can be purchased by the general public on-line.
Relevant legislative provisions
All references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act):
Section 13-10
Section 38-2
Section 38-3
Section 38-4.
A New Tax System (GST) Regulations 1999:
Subregulation 38-3.02(1)
Subregulation 38-3.02(2)(a)
Subregulation 38-3.02(2)(b)
Reasons for decision
Summary
The importation of the product is a non-taxable importation as the supply of the product would be GST-free if the supply had been made in Australia.
Detailed reasoning
Non taxable importation
Section 13-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that an importation is non-taxable (not subject to GST) if:
a) it is a non-taxable importation under Part 3-2 of the GST Act, or
b) it would have been a supply that was GST-free (or input taxed) had the supply been made in Australia.
GST-free supply
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.
Food is defined in section 38-4 of the GST Act and includes (amongst other things) goods to be mixed with or added to food for human consumption (including condiments, spices, seasonings, sweetening agents or flavourings).
We accept that your product is used as a modifying agent on the cream to produce whipped cream. During the whipping process some of the product is infused into the cream and is thus consumed with the cream.
Consequently, we consider the product to be a good that is added to food for human consumption and therefore, paragraph 38-4(1)(e) of the GST Act is also satisfied.
Food that is excluded from being GST-free
However, a supply of food which falls under section 38-3 of the GST Act is not GST-free under section 38-2 of the GST Act.
Paragraph 38-3(1)(c) of the GST Act specifies that a supply of food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1) is not GST-free. Your product is not food of a kind covered in Schedule 1. Hence paragraph 38-3(1)(c) of the GST Act does not exclude the supply of the product from being GST-free
Paragraph 38-3(1)(e) of the GST Act specifies that a supply of food is taxable if it is a supply of food of a kind specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (Regulations). In particular, regulation 38-3.02 of the Regulations applies to food additives and determines those food additives that are taxable or GST-free.
Food additive
The term food additive is not defined in the GST Act or any other Act therefore we must use its everyday meaning. The word additive is defined in the Macquarie Dictionary (5th edition) to mean a substance added to a product, usually to preserve or improve its quality. Examples of products that are considered to be additives for GST purposes include colourings, flavourings, preservatives, antioxidants, sweeteners, vitamins, minerals and modifying agents.
In your case, we consider the product to be an additive as it is infused into the cream and substantially modifies the cream, turning it from a liquid into a foam-like substance.
Subregulation 38-3.02(1) of the GST Regulations states that food additives, other than exempt food additives, will be subject to GST. The term 'exempt food additive' is defined in subregulation 38-3.02(2) of the GST Regulations to mean:
(a) a food additive which, at the time of supply is packaged and marketed for retail sale;
(b) a food additive which, at the time of supply:
(i) has a measurable nutritional value; and
(ii) is supplied for use solely or predominantly in the composition of food; and
(iii) is essential to the composition of that food.
The product only needs to satisfy either paragraph (a) or (b) to be exempt food additive. In this case, the product can be purchased by the general public from an online website, and the product is in small sizes suitable for retail. Therefore, it is packaged and marketed for retail sale, and the supply of the product would be the supply of an exempt food additive under paragraph 38-3.02(2)(a) of the Regulations. Hence, the supply of the product would be GST-free under section 38-2 of the GST Act.
Conclusion:
Consequently, as a supply of your product would be GST-free, your importation of the product is a non-taxable importation under paragraph 13-10 (b) of the GST Act.