Edited version of private advice

Authorisation Number: 1051538515491

Date of advice: 3 July 2019

Ruling

Subject: GST and a supply of various fruit preparation products

Question 1

Is the supply of various fruit preparation products by you GST-free pursuant to section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes. Your supply of various fruit preparation products is GST-free under section 38-2 of the GST Act.

Question 2

Are you required to register for GST in Australia?

Answer

You will not be required to register for GST in Australia if the only supplies you make are GST-free supplies of fruit preparation products, and made through an enterprise you carry on outside the indirect Tax Zone (Australia).

Question 3

Is the supply of various fruit preparation products is a non-taxable importation under paragraph 13-10(b) of the GST Act?

Answer

Yes, the importation of various fruit preparation products is a non-taxable importation under paragraph 13-10(b) of the GST Act.

Relevant facts and circumstances

You are a non-resident entity which is not registered for GST.

You are planning to supply various fruit preparation products' (both sugar based formula and non-sugary formula) to businesses into Australia.

The fruit preparation products are not marketed as ingredients for beverages.

The fruit preparation products will be sold in special containers.

The fruit preparation products are not being marketed using the traditional advertising tools.

The fruit preparation products will be produced according to customer technical requirements and brief and will be used as an ingredients of their product, without the mention of you.

You will supply the fruit preparation products to Australian businesses on delivery duty paid (DDP). You will be the "owner' on importation documents when you enter the goods for home consumption.

You will facilitate customs clearance and shipped to the Australian customers 'right away. There will be no ware house or storage in Australia.

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 Paragraph 38-3(1)(d)

A New Tax System (Goods and Services Tax) Act 1999 Section 38-4

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-4(1)(a)

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-4(1)(c)

A New Tax System (Goods and Services Tax) Act 1999 Schedule 2

Reasons for decision

GST-free

A supply of food is GST-free under section 38-2 of the GST Act if the products satisfy the definition of food in section 38-4 of the GST Act and the supply is not excluded by section 38-3 of the GST Act.

The term 'food' is defined in paragraph 38-4 (1) of the GST Act as including:

(a)  food for human consumption (whether or not requiring processing or treatment);'.

(b)  ingredients for food for human consumption;

(c)  beverages for human consumption;

(d)  ingredients for beverages for human consumption;

Based on the information provided, the fruit preparation products will be used for human consumption. Accordingly, the supply of the fruit preparation products fall under paragraph 38-4(1)(b) of the GST Act as 'ingredients for food for human consumption.

However, under paragraph 38-3(1)(e) of the GST Act, a supply is not GST-free if it is food of a kind specified in regulations made for the purposes of subsection 38-3(1) of the GST Act.

Regulation 38-3.02 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) applies to food additives. This regulation gives effect to paragraph 38-3(1)(e) of the GST Act and determines those foods that are not GST-free.

Subregulation 38-3.02(1) of the GST Regulations states that food additives, other than exempt food additives, are not GST-free.

Although the term 'food additive' is used in the regulation, it is not defined elsewhere in the GST Act.

Issue 11 of the Food Industry Partnership - issues register discusses whether food additives are GST-free under section 38-2 of the GST Act and it states:

The word 'additive' is defined in The Macquarie Dictionary (3rd edition, 1997) to mean '...3. a substance added to a product, usually to preserve or improve its quality'. Examples of products that are considered to be food additives for GST purposes include:

·         colourings

·         flavourings

·         preservatives

·         antioxidants

·         sweeteners

·         vitamins

·         minerals

·         modifying agents (vegetable gums, mineral salts, food acids, emulsifiers, humectants, thickeners)

Some of these additives fall within the term 'ingredient for food for human consumption' as stated in paragraph 38-4(1)(b), whilst others are specifically included in paragraph of the GST Act as 'goods to be mixed with or added to food for human consumption'.

Based on the information provided, the fruit preparation products do not come within the definition of addictive and therefore they are not food additive for the purposes of paragraph 38-3(1)(e) of the GST Act. In addition, your supply of the fruit preparation does not fall within any of the other exclusions in section 38-3 of the GST Act.

Therefore, your supply of the fruit preparation products to the Australian businesses is GST-free under section 38-2 of the GST Act.

Issue 2

Under section 23-5 of the GST Act, an entity is required to be registered for GST if:

a)    the entity carries on an enterprise; and

b)    the entity's GST turnover (current and/or projected) meets the GST registration turnover threshold (currently $A75,000 and $A150,000 for non-profit organisation).

The entity can choose to register for GST if its GST turnover is less than $A75, 000.

The current annual turnover is the sum of the values of all supplies made in a particular month plus the previous 11 months. The projected annual turnover is the sum of the value of all supplies made in a particular month plus the next 11 months.

GST annual turnover

In regard to the calculation of GST turnover, subsections 188-15(3) and 188-20(3) of the GST Act are about supplies to be excluded when calculating the current and projected annual turnover.

Under paragraph 188-15(3)(d) of the GST Act, any GST-free supply made by a non-resident that does not make the supply through an enterprise that the non-resident carries on in Australia is disregarded when calculating the current GST turnover.

Under paragraph 188-20(3)(d) of the GST Act, any GST-free supply made by a non-resident that does not make the supply through an enterprise that the non-resident carries on in Australia is disregarded when calculating the projected GST turnover.

In this instance, you will not be required to register for GST in Australia if the only supplies you make are GST-free supplies of fruit preparation products, and made through an enterprise you carry on outside Australia.

Issue 3

GST is payable on all taxable importation of goods into Australia.

Section 13-5 of the GST Act provides that an entity makes a taxable importation if:

·           goods are imported and

·           the entity enters the goods for home consumption within the meaning of the Customs Act 1901.

However, an importation is not a taxable importation to the extent that it is a non-taxable importation.

Paragraph 13-10(b) of the GST Act provides that an importation is a non-taxable importation to the extent that, had it been a supply, the supply would have been a GST-free or input taxed supply.

As discussed in Question 1 above, the fruit preparation are the ingredients for food for human consumption. Hence, had it been a supply, the supply of the fruit preparation products would have been GST-free supply under section 38-2 of the GST Act.

Therefore, the importation of the fruit preparation products is a non-taxable importation under paragraph 13-10(b) of the GST Act.