Edited version of private advice

Authorisation Number: 1052097187772

Date of advice: 23 March 2023

Ruling

Subject: GST and supply of powdered product

Question

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

Answer

Yes.

Relevant facts and circumstances

You are an ingredients distributor active in the Australian and overseas markets. You specialise in providing customers with the widest possible range of quality chemicals, ingredients and raw materials sourced from the world's best manufacturers.

You are registered for GST.

You are importing the Product in bulk bags.

You are selling the Product only to food manufacturers who use the Product as an ingredient in the manufacture of food products.

The Product is added in the manufacture of food to improve the final food product's flavour, texture and increase yield.

The Product has no non-food uses.

You provided details of how the Product is manufactured.

You provided photos of the Product in its packing and out of the packaging.

The Product packaging is printed with the product name, product code, date of manufacture and expiry date. The packaging does not include product instructions or any reference to the use or application of the Product. The Product is handled and stored in accordance with food regulations.

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

Reasons for decision

Summary

The supply of the Product is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as the Product is an ingredient for food for human consumption under paragraph 38-4(1)(b) of the GST Act and is not excluded from being GST-free by section 38-3 of the GST Act.

Detailed reasoning

A supply of a product 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)
• ingredients for beverages for human consumption (paragraph 38-4(1)(b) of the GST Act) and
• goods to be mixed with or added to food for human consumption (paragraph 38-4(1)(e) of the GST Act).

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), or food that is a combination of one or more foods at least one of which is food of such a kind specified in Schedule 1.

Application to the Product

The powdered Product is sold in bulk bags only to food manufacturers for use as an ingredient in the manufacture of food products. The Product is added in the manufacture of food to improve the final food product's flavour, texture and increase yield. The Product has no non-food uses.

The Product packaging is printed with the product name, product code, manufacturing and expiry date. The packaging does not include product instructions or any reference to the use or application of the Product. The Product is handled and stored in accordance with food regulations.

Based on the information provided we consider that the Product meets the definition of food under paragraph 38-4(1)(b) of the GST Act.

The Product is not food of a kind specified in Schedule 1; therefore, the supply is not excluded from being GST-free by section 38-3 of the GST Act. As such, the supply of the Product is GST-free under section 38-2 of the GST Act.