Edited version of private advice

Authorisation Number: 1051904823762

Date of advice: 12 October 2021

Ruling

Subject: Goods and services tax

Questions

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

2.            Is the importation of the Product a non-taxable importation under paragraph 13-10(b) of the GST Act?

Answers

1.            Yes. The supply of the Product is GST-free under section 38-2 of the GST Act.

2.            Yes. The importation of the Product is a non-taxable importation under paragraph 13-10(b) of the GST Act.

Relevant facts and circumstances

You are registered for GST.

You import the Product from overseas and resell the Product online to customers.

The Product is packed in a flexible or semi-rigid package made from heat-resistant laminated plastic, it arrives in Australia in vacuum sealed packages.

Once the Product is taken out of the packaging, the Product needs to be immersed in water for a minimum of X-X hours to soak in the moisture and then can be cooked by boiling or steaming.

The Product can also be an ingredient of a dish, for example, it can be added with sugar or fruits to make a dessert.

The best-known use of the Product is in a soup. They can be cooked with rice, or they can be added to egg tarts and other desserts......

You give out a brochure to new customers that provides a guideline on how to best consume the Product. The brochure provides information of the recommended process for using the Product.

You sell the Product in ...grams pouch, the sale price ranges between $X and $X, depending on the shape and colour of the pieces. However, their nutrient contents are essentially the same.

This is how the Product is marketed on your website ......

The overseas manufacturer does not specifically label or market the Product as medicinal goods.

There is no dosage or instruction on the frequency and amount of the Product that can be consumed in a period of time.

You do not specifically label and market the Product as being medicinal goods in Australia.

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)(b)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 13-5 (1) (a)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 13-5 (1) (b)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 13-10(b)

A New Tax System (Goods and Services Tax) Act 1999 Schedule 1 to the GST Act

Reasons for decision

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

The definition of food in section 38-4 of the GST Act includes ingredients for food for human consumption (paragraph 38-4(1)(b) of the GST Act.

On the information you have provided, the Product is packaged and marketed as food and are sold mainly to end consumers as an ingredient for food for human consumption.

There is nothing in your website and brochure provided to your customers promoting the Product that is similar in nature to a medicine or a tonic.

Although the Product may have medicinal or therapeutic purposes:

•                    the Product is not provided a part of herbal formula/prescription

•                    the Product is not ingredients you market to use in medicinal decoctions

•                    the overseas Manufacturer does not specifically label or market the Product as medicinal goods

•                    there is no instruction on the frequency and amount of the Product that can be consumed in a period of time.

•                    you do not specifically label and market the Product as being medicinal goods in Australia.

It is considered that you supply the Product in Australia and market the Product as ingredient 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). Your Product is not a food of a kind specified in Schedule 1. In addition, your Product does not fall within any of the other exclusion in section 38-3 of the GST Act. Therefore, the supply of the Product is GST-free under section 38-2 of the GST Act.

Question 2

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 such, an importation of ingredient for food is a non-taxable importation only if it would have been GST-free if supplied in Australia.

As discussed in Question 1 above, the supply of the Product is GST-free under section 38-2 of the GST Act. Therefore, the importation of the Product is a non-taxable importation under paragraph 13-10(b) of the GST Act.