Edited version of private advice

Authorisation Number: 1051957501335

Date of advice: 11 March 2022

Ruling

Subject: GST and supply of food additive

Question

Is the supply of compressed gas cylinders (the Products) that are manufactured, packaged, and retailed for the sole purpose of food production as an additive subject to GST?

Answer

No.

Relevant facts and circumstances

You import and sell small, compressed gas cylinders (the Products) that are marketed and packaged for the sole purpose of food production as an additive.

The Products are used as propellant to carbonated drinks or to make the drinks sweeter, creamier, and richer.

You provided the link to your website through which you sell the Products. The information provided on the website show that the Products are packaged and marketed for retail sale.

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, section 38-4

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

Reasons for decision

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 section 38-4 of the GST Act and includes (amongst other things) goods to be mixed with or added to food for human consumption (including condiments, spices, seasonings, sweetening agents or flavourings).

We accept that the Products are modifying agents used on beverages as propellant to carbonated drinks or to make drinks sweeter, creamier and richer. Therefore, we consider the Products to be a good that is added to food for human consumption and therefore, paragraph 38-4(1)(e) of the GST Act is satisfied.

Food that is excluded from being GST-free

A supply of food which falls under section 38-3 of the GST Act is not GST-free under section 38-2.

Paragraph 38-3(1)(c) of the GST Act specifies that a supply of food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1) is not GST-free. The Products are not food of a kind covered in Schedule 1. Hence paragraph 38-3(1)(c) of the GST Act does not exclude the supply of the Products from being GST-free.

Paragraph 38-3(1)(e) of the GST Act specifies that a supply of food is taxable if it is a supply of food of a kind specified in the A New Tax System (Goods and Services Tax) Regulations 2019 (GST Regulations). For the purposes of paragraph 38-3(1)(e), section 38-3.01 of the GST Regulations specifies food additives other than exempt food additives.

Food additive

The term food additive is not defined in the GST Act or any other Act therefore we must use its everyday meaning. The word additive is defined in the Macquarie Dictionary (5th edition) to mean a substance added to a product, usually to preserve or improve its quality. Examples of products that are considered to be additives for GST purposes include colourings, flavourings, preservatives, antioxidants, sweeteners, vitamins, minerals and modifying agents.

In your case, we consider the Products to be an additive as they are modifying agents used as propellant to carbonated drinks or to make drinks sweeter, creamier, and richer.

Subsection 38-3.01(1) of the GST Regulations states that food additives, other than exempt food additives, will be subject to GST. The term 'exempt food additive' is defined in subsection 38-3.01(2) of the GST Regulations to mean:

(a) a food additive which, at the time of supply is packaged and marketed for retail sale;

(b) a food additive which, at the time of supply:

(i) has a measurable nutritional value; and

(ii) is supplied for use solely or predominantly in the composition of food; and

(iii) is essential to the composition of that food.

The product only needs to satisfy either paragraph (a) or (b) to be exempt food additive. The information available from the website through which the Products are sold indicate that they are packaged and marketed for retail sale. The supply of the Products is a supply of an exempt food additive under paragraph 38-3.01(2)(a) of the GST Regulations. Hence, the supply of the Products is GST-free under section 38-2 of the GST Act.