Edited version of private advice

Authorisation Number: 1051885668765

Date of advice: 19 August 2021

Ruling

Subject: GST and seaweed products

Question 1

Is the supply of a Product A GST-free pursuant to section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer 1

Yes, your supply of the Product A is GST-free under section 38-2 of the GST Act.

Question 2

Is the supply of a Product B GST-free pursuant to section 38-2 of the GST Act?

Answer 2

No, your supply of the Product B is not GST-free under section 38-2 of the GST Act. Your supply of the Product B is a taxable supply under section 9-5 of the GST Act and therefore subject to GST.

Question 3

Is the supply of mineral salt GST-free pursuant to section 38-2 of GST Act?

Answer 3

Yes, your supply of mineral salt is GST-free under section 38-2 of the GST Act.

Question 4

Is the supply of the capsules GST-free pursuant to section 38-2 of GST Act?

Answer 4

No, your supply of capsules is not GST-free under section 38-2 of the GST Act. Your supply of capsules is a taxable supply under section 9-5 of the GST Act and therefore subject to GST.

This ruling applies for the following periods:

The tax periods commencing 1 July 2021 and ending 30 June 2025.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it.

The fact sheet has more information about relying on your private ruling.

You are an Australian company which is registered for GST.

You import various products and sell on your retail online.

The Product A

The Product A is sold in a xxg bottle.

The Product A can be added to savoury hot or cold food, soups and smoothies and in baking. The Product A can be sprinkled on top or added before or during cooking and also can be used in baking. The Product A can used for Umami flavour and salt replacement.

Ingredients

100% (Organic)

The Product B

The Product B is sold in a xxxg bottle.

The Product B can be added to savoury hot or cold food, soups and smoothies.

The Product B can be sprinkled on top or added before or during cooking.

The Product B can used for Umami flavour and salt replacement.

Daily intake

XXX gram or x teaspoon a day.

The Product B is for nutritional therapeutic use in gut health, thyroid health and detoxification.

The Product B provides complete and balanced dietary foundation for all ages in everyday use and nutritional therapy.

The Product B provides vitamins, minerals, antioxidants, proteins and numerous nutritional compounds including B12, selenium and zinc.

Mineral salt

Mineral salt is sold in a shaker bottle.

Mineral salt can be used as ingredient and seasoning for savoury hot or cold food, soups and smoothies.

Mineral salt for people wanting the nutritional benefits and flavour of seaweed and to lower salt consumption.

Ingredients

seaweed (Organic)

sea salt

Capsules

Capsules are sold in xx capsule and xxx capsule bottles. They contain vitamins and minerals. They are to be taken with meals or drinks to a recommended dosage.

The Capsules provide a full spectrum of vitamins and minerals.

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 subsection 38-3(1)

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

Reasons for decision

Under section 38-2 of the GST Act a supply of food is GST-free 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 (whether or not requiring processing or treatment) under paragraph 38-4(1)(a) of the GST Act.

However, paragraph 38-3(1)(c) of the GST Act provides that 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).

Although 'food' as referred to in subsection 38-4(1) is not further defined in the GST Act, it will be taken to have its ordinary meaning. The Macquarie Dictionary 3rd Edition ('the dictionary') defines 'food' as 'what is eaten or taken into the body for nourishment...'.

However, not all substances that provide nourishment will satisfy the definition of food in the GST Act.

We need to determine whether your supply of seaweed products satisfies definition of food for the purposes of subsection 38-4 (1) of the GST Act.

The Product A

Based on the information, the Product Asatisfies definition of food for the purposes of subsection 38-4 (1) of the GST Act.

However, paragraph 38-3(1)(c) of the GST Act provides that 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).

The Product Aisnot food of a kind specified in Schedule 1. Furthermore, the supply of the Product A does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the supply of the Product Ais a GST-free supply under section 38-2 of the GST Act.

The Product B

We need to determine whether the Product B satisfy definition of food for the purposes of subsection 38-4 (1) of the GST Act.

The word 'food' in subsection 38-4 (1) is not itself defined and so will bear its ordinary meaning. The Macquarie Dictionary 3^rd edition, defines 'food' as:

1. what is eaten, or taken into the body, for nourishment.

2. more or less solid nourishment (as opposed to drink);

3. a particular kind of solid nourishment: a breakfast food.

The dictionary definition of 'food' refers to the function of nourishment. It is accepted that the product may provide nutrition to varying degrees because it contains vitamins, antioxidants and phytonutrients.

However, Food Industry Partnership Issues Register, Item 18, provides that not all substances that can be taken into the body and that also provide nourishment will satisfy the definition of food in the GST Act.

For example, a particular medicine may incidentally provide some nourishmentalthough its primary purpose is medicinal. It may be said to be 'taken into the body' and to provide 'nourishment', yet its essential character is that of a medicine.

The facts indicate that the Product B is marketed to combine with other foods and liquids. The Product B is not listed on the Therapeutic Goods Administration register of therapeutic goods. However, the labelling of the Product B states that it provides a complete and balanced dietary foundation for all ages in everyday use and nutritional therapy.

The directions for use indicate the Product B should be used in recommended quantities. This reinforces the product's therapeutic nature.

Fact indicates that Product B provide vitamins, minerals, and numerous nutritional compounds. Iodine contributes to normal thyroid, nervous system and cognitive function.

Based on the information provided, we consider that the essential character of the Product B is not that of a food but that of a supplement.

Dietary supplements are taken for the purpose of supplementing an inadequate diet or to prevent illness or debility.

The emphasis in the marketing material of the Product B is to prevent and compensate for a nutritional deficiency It is therefore concluded the Product B has the character of a dietary supplement rather than food.

It is therefore considered that the essential character of the Product B is not that of a food but that of a supplement. Accordingly, for GST purposes, Product B is not considered to be food for human consumption under subsection 38-4(1) of the GST Act. As Product B fails to satisfy the definition of a food, the Product B will not be GST-free under section 38-2 of the GST Act.

Furthermore, your supply of the Product B does not satisfy any other GST-free provisions under the GST Act.

Therefore, your supply of the Product B is a taxable supply under section 9-5 of the GST Act and subject to GST.

Mineral Salt

Food is defined in section 38-4 of the GST Act to include goods to be mixed with or added to food for human consumption (including condiments, spices, seasonings, sweetening agent or flavourings) (paragraph 38-4(1)(e) of the GST Act).

Food Industry Partnership Issues Register, Item 18, provides that goods that satisfy paragraph 38-4(1)(e) of the GST Act ) are for the purpose of adding to the taste or flavour of food, as indicated by the scope of the words in the brackets 'including condiments, spices, seasonings, sweetening agents or flavourings'.

Mineral salt is intended to be mixed with or added to food for human consumption as flavourings or condiments and therefore, satisfy the definition of food in paragraph 38-4(1)(e) of the GST Act.

However, paragraph 38-3(1)(c) of the GST Act provides that a supply of food is not GST-free if it is food of a kind specified in Schedule 1.

Mineral salt is not food of a kind specified in Schedule 1. Furthermore, your supply of seaweed mineral saltdoes not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, your supply of mineral salt is a GST-free supply under section 38-2 of the GST Act.

Capsules

We need to determine whether seaweed capsules satisfy definition of food for the purposes of subsection 38-4 (1) of the GST Act.

Based on the ingredients and the instruction for recommended dosage, we consider that the Capsules fall under the category of vitamins and minerals products.

In the ATO's Food Industry Partnership - Issues register, issue 21 provides the following:

"...Vitamins and minerals are supplied in various forms:

•                 capsule

•                 caplet, or

•                 tablet

Unlike food, vitamins and minerals are 'taken', not eaten. Instructions are often provided with the product including a recommended dosage and suggesting that the product be taken at certain times of the day, either on an empty stomach or with food or a beverage, such as water or juice. Often these products are taken for therapeutic or medicinal reasons, or to prevent or compensate for a nutritional deficiency.

Vitamins and minerals are commonly taken by swallowing or in some instances may be added to food.

It is considered that the essential character of vitamins and minerals is not that of food, but that of a supplement. Therefore, for GST purposes, vitamins and minerals are not considered to be food for human consumption under paragraph 38-4(1)(a) of the GST Act.

Support for this view can be found in the Chairman's comments in Grosvenor Commodities (LON/90/1805X) No 7221; [1992] BVC 761, where royal jelly capsules were not considered to be food. The Chairman said:

the capsules do not satisfy hunger... they do not look like food, taste like food or fill the stomach like food. In my mind the capsules are clearly not food.

Example

Multivitamin tablets are not considered to be food for human consumption for GST purposes. As a result, they are subject to GST."

Based on the information provide, the Capsules are not considered to be food for human consumption under paragraph 38-4(1)(a) of the GST Act and therefore, the capsules do not satisfy the definition of food. Accordingly, the supply of the capsule will not be GST-free under section 38-2 of the GST Act.

Furthermore, your supply of the capsules does not satisfy any other GST-free provisions under the GST Act.

Therefore, your supply of the capsules is a taxable supply under section 9-5 of the GST Act and subject to GST.