Edited version of private advice

Authorisation Number: 1051930431834

Date of advice: 17 December 2021

Ruling

Subject: GST and food classification

Question 1

Is the importation of the Xml and Yml bottles of specified products (the Products) a taxable importation pursuant to section 13-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No.

Subsection 13-5(1) of the GST Act provides that an entity makes a taxable importation if:

(a) goods are imported, and

(b) the entity enters the goods for home consumption within the meaning of the Customs Act 1901.

However, the 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 if had the importation been a supply it would have been a GST-free supply.

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.

The Products are food additives that are packaged in Xml and Yml bottles and marketed for retail sale. As such, the Products are exempt food additives under paragraph 38-3.01(2)(a) of the A New Tax System (Goods and Services Tax) Regulations 2019 and hence not excluded from being GST-free by paragraph 38-3(1)(e) of the GST Act.

Further, had the importation been a supply, the supply of the Products would not have been excluded from being GST-free under any other paragraphs in subsection 38-3(1) of the GST Act or the other subsections in section 38-3 of the GST Act.

Based on the information provided the Products are used in food preparation. More specifically the Products are used in specified food dishes. Therefore, the Products meet the definition of food in paragraph 38-4(1)(b) of the GST Act. Further, had the importation of the Products been a supply, the supply would not have been excluded from being GST-free by section 38-3 of the GST Act. Therefore, such supply would have been GST-free under section 38-2 of the GST Act.

Accordingly, the importation of the Products is a non-taxable importation under paragraph 13-10(b) of the GST Act as had it been a supply it would have been GST-free. It follows that GST is not payable on the importation of the Products.

Question 2

Is the supply of the Xml and Yml bottles of specified products (the Products) GST-free?

Answer

Yes.

As stated above a supply of food is GST-free under section 38-2 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.

Based on the information provided your supply of the Products is GST-free under section 38-2 of the GST Act as:

• the Products are ingredients for food for human consumption therefore meet the definition of food in paragraph 38-4(1)(b) of the GST Act, and
• the supply of the Products is not excluded from being GST-free by section 38-3 of the GST Act.

Relevant facts and circumstances

You are registered for GST.

You import the Products into Australia in two packaging sizes:

A x Xml Cartons - $X (wholesale)

B x Yml Cartons - $Y (wholesale)

You provided images of Products in Xml and Yml bottles as imported.

The labels on the bottles include certain information about the Products.

You provided copies of the Product Specification Sheet for each Product which state:

Product Name: XXX

Net Weight: Xml & Yml

Description: XXX

Ingredients: XXX

Package: Packed in A x Yml & B x Yml bottles which come in cartons

Your website, XXX, under the 'About' tab provides that you are an importer of certain food products.

The Xml bottles of the Products are marketed on your website as food ingredients that are used in food preparation. More specifically, they are used in specified food dishes.

The Xml bottles of the Products are advertised on your website at XXX as ingredients for specified food.

You do not do any direct marketing outside what is displayed on your website.

The Yml bottles are not advertised on your website. You stated that these are relevantly new and that you will eventually advertise them on your website if the market feedback is positive.

The contents of the Xml and Yml bottles are exactly the same and are not differentiated in any way.

Your overseas supplier is C, who is also the manufacturer of the Products. C's website provides that they are producers and exporters of certain food products. C advertises its products under a different label.

The Products are designed and packaged for food retail sale.

The Products meet the standards of Food Standards Australia New Zealand (FSANZ).

You sell the Products to food manufacturers, grocery retailers, hospitality businesses as well as non-food entities. You do not sell the products directly to consumers.

You sell the Products to your customers as they are, in cartons of A or B as imported. You do not repackage or relabel the Products after their importation. You do not change the Products or differentiate them in any other way to suit different buyers such as food retailers or non-food entities.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 13-5

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

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 section 38-4

A New Tax System (Goods and Services Tax) Regulations 2019 section 38-3.01