Edited version of private advice

Authorisation Number: 1052055192295

Date of advice: 22 November 2022

Ruling

Subject: GST and supply of food product

Question

Is the entity making a taxable supply when it supplies the Product?

Answer

Yes.

Relevant facts and circumstances

The entity is registered for GST.

The entity is an Country A manufacturer and distributor of food products.

The entity is selling a food product (the Product) that is made from ginger that is cut up into certain size pieces, infused in syrup, dried and rolled into sugar.

The Product has the same ingredients and undergoes the same manufacturing process as crystallised ginger.

The Product has the same characteristics in terms of texture, taste and appearance as crystalised ginger.

The entity is marketing the Product as an ingredient for food. The Product is sold in the baking section of the supermarket among other food ingredients.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999, section 9-5

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

Reasons for decision

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states:

You make a taxable supply if:

(a)          you make the supply for *consideration; and

(b)          the supply is made in the course or furtherance of an *enterprise that you *carry on; and

(c)          the supply is *connected with the indirect tax zone: and

(d)          you are *registered, or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

(*denotes a term defined in section 195-1 of the GST Act).

The entity supplies the Product for consideration and in the course of its enterprise. The supply is connected with Australia and the entity is registered for GST. All the requirements in section 9-5 are satisfied; therefore, the supply of the Product is a taxable supply unless it is GST-free or input taxed.

There is no provision in the GST Act under which the supply of the Product would be input taxed. What remains to be determined is whether the supply of the Product is GST-free.

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.

Food is defined in section 38-4 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].

The Product is food for human consumption 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 third column of the table in clause 1 of Schedule 1 to the GST Act (Schedule 1).

Schedule 1 specifies crystallised ginger and preserved ginger under item 13.

'Crystallised ginger' is not defined in the GST Act therefore it takes its ordinary meaning.

Crystalised ginger as ordinary understood is ginger that is cooked in syrup, dried and rolled into sugar.

The Product is made from ginger that is peeled, cut, infused in syrup, dried and then coated in sugar. The Product has the same ingredients and undergoes the same manufacturing process as crystallised ginger. The Product has the same characteristics in terms of texture, taste and appearance as crystalised ginger and therefore is covered by item 13.

Crystallised ginger is specifically listed in item 13. Item 13 does not contain a marketing test. Therefore, crystallised ginger is covered by item 13 irrespective of the name under which it is marketed and regardless of whether it is put up for sale as food or ingredient for food for human consumption.

Accordingly, the supply of the Product is not GST-free pursuant to paragraph 38-3(1)(c) of the GST Act. The entity makes a taxable supply when it supplies the Product.