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Edited version of private advice
Authorisation Number: 1051763019008
Date of advice: 2 October 2020
Ruling
Subject: GST and food classification
Question
Is a supply of toasted seeds (product) by you GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No. Your supply of the product is not GST-free under section 38-2 of the GST Act.
Relevant facts and circumstances
You are an Australian entity which is registered for GST.
You import toasted seeds ('product') and supply in Australia.
The product is used for various baking applications possible such as topping / garnish bread or buns and desserts as well as an ingredient in manufacturing. The air-dried seed has the same end use / application as raw dehulled seed.
The product is toasted by putting in a hot air dryer at a minimum of 110°C for two hours.
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
Reasons for decision
Summary
The supply of the product is not GST-free under section 38-2 of the GST Act as the product is subject to GST by virtue of paragraph 38-3(1)(c) of the GST Act.
Detailed reasoning
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 subsection 38-4(1) 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) and ingredients for food for human consumption (paragraph 38-4(1)(b) of the GST Act).
The productis considered to be either food for human consumption or ingredients for food for human consumption.
However, under paragraph 38-3(1)(c) of the GST Act, 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).
Item 16 of Schedule 1 (Item 16) provides that 'seeds or nuts that have been processed or treated by salting, spicing, smoking or roasting, or in any other similar way' are not GST-free.
Therefore, we need to be determined whether the product is within Item 16.
You advised that the seeds undergo a hot air dryer at a minimum of 110°C for two hours. As the product goes through the heat treatment, the product has been treated by toasting which is similar way of roasting.
In summary, the product is of a kind of food items listed under item 16. Thus, the supply of the product is considered to be a supply of food that is covered in Item 16. As a result, the product is subject to GST by virtue of paragraph 38-3(1)(c) of the GST Act.
Accordingly, the supply of the product is not GST-free under section 38-2 of the GST Act. Your supply of the product is subject to GST by virtue of paragraph 38-3(1)(c) of the GST Act.