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Edited version of private advice
Authorisation Number: 1051567209533
NOTICE
This is an edited version of a revised private ruling. It replaces the edited version of the private ruling with the authorisation number 1051293665727
Date of advice: 26 August 2019
Ruling
Subject: GST and food classification- trail mix (Product)
Question
ls your supply of the Product GST-free?
Answer
Yes, your supply of theProductis GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
Relevant facts and circumstances
You are registered for Goods and Services Tax.
You supply the Product to retailers, wholesalers and individuals. The Product is packaged and sold to consumers in a variety of sizes.
On the labelling of the Product, the ingredients include nuts, fruits, pieces of white compound chocolate and others. The nuts included in the product have not been salted, spiced, smoked or roasted or treated in any other similar way.
Relevant legislative provisions
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)(c)
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 Schedule 1 clause 1 table
item 8
Reasons for Decision
Summary
The supply of the Product is a supply that is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as the Product is not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act (food of a kind specified in the third column of the table in clause 1 of Schedule 1, or food that is a combination of one or more foods at least one of which is food of such a kind).
Detailed reasoning
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 (paragraph 38-4(1)(a)).
The Product satisfies the definition of food because it is sold as food for human consumption. Therefore the next thing to consider is whether it falls within any of the exclusions in section 38-3 of the GST Act.
Of relevance to the Product is paragraph 38-3(1)(c) of the GST Act, which provides a supply of food is not GST-free if it is food of a kind that is specified in Schedule 1, or food that is a combination of one or more foods at least one of which is food of such a kind.
Item 8 of Schedule 1
Item 8 in the table in clause 1 of Schedule 1 to the GST Act (item 8) lists confectionery, food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery.
The Product is not considered to be food of a kind specified in item 8 of Schedule 1. The Product is a trail mix which does not meet the ordinary meaning of confectionery as it is not a sweet delicacy.
The Product is not marketed as a confectionery taking into account its name, packaging, and how it is promoted.
The Product is not marketed as an ingredient for confectionery as the packaging provides the product is to for healthy snacking between meals rather than as an ingredient for another confectionery product.
Further as the Product contains principally GST-free nuts and dried fruit the Product is not excluded from being GST-free as a food consisting principally of confectionery.
Paragraph 38-3(1)(c) - combination of foods
The issue then is whether the Product is food that is a combination of one or more foods at least one of which is food of a kind specified in the third column of the table in clause 1 of Schedule 1.
The pieces of white chocolatecontained in the Producthave the following ingredients:
Issue 29 of the Food Industry Partnership Issues Register outlines the ATO view on the GST treatment of different types of chocolate. In describing the various types of chocolates, the following statements are made:
|
Compound chocolate |
Made with fats other than cocoa butter. They look a lot like chocolate, their taste is similar to chocolate, but they don't necessarily feel or act like chocolate. They may not have the shine of real chocolate or melt in your mouth. You may have to chew them. They may also be referred to as 'compound coatings' or 'summer coatings'. They are simpler to use than real chocolate in candy making. Instead of having to temper them, as you do real chocolate, you can use them as a coating by simply melting. |
From the above descriptions, the white chocolate in the Product is compound chocolate.
In respect of compound chocolate, the Detailed Food List (DFL), which is a public ruling, was provided.
The DFL also provides the following in regards to trail mix:
|
trail mix containing processed/treated nuts, crystallised/glace fruit or confectionery pieces |
taxable |
Combination of foods, at least one of which is taxable. Paragraph 38-3(1)(c) of the GST Act applies. |
|
trail mix containing raw nuts and/or seeds and/or dried fruits only |
GST-free |
Food for human consumption that is not of a kind specified in Schedule 1 of the GST Act. |
The pieces of white chocolate contained in the Product are not marketed as an ingredient for confectionery and are considered to fall within the description of 'compound chocolate (not marketed as an ingredient for confectionery)' in the DFL. Accordingly, the white chocolate pieces are treated as an ingredient for food under the DFL and the Product does not fall within the description of trail mix containing confectionery pieces under the DFL. As such, the DFL provides the Product is GST-free.
The remainder of the Product contains GST-free ingredients such as unprocessed nuts and dried fruit. As a result, the Product is not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. That is, the Product is not considered to be food of a kind specified in the third column of the table in clause 1 of Schedule 1, nor is it considered to be food that is a combination of one or more foods at least one of which is food of such a kind.
Conclusion
The supply of the Product is a supply that is GST-free under section 38-2 of the GST Act as the Product is not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.