Edited version of private advice

Authorisation Number: 1052245974990

Date of advice: 16 May 2024

Ruling

Subject: GST - food classification

Question 1

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

Answer

No.

Question 2

Is the importation of the Products a taxable importation under section 13-5 of the GST Act?

Answer

Yes.

This ruling applies for the following period:

15 May xxxx - 14 May xxxx

Relevant facts and circumstances

The entity is registered for GST.

The entity is importing the Products into Australia.

The Products' ingredients consist mainly of dairy based products and sugar.

Once the ingredients are cooked, the Products are either cut into rectangular and square pieces or shaped into round balls.

The Products are supplied frozen. At consumer level, the Products are kept in freezer for long term and thawed in fridge.

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) Act 1999 section 42-5

Reasons for decisions

Question 1

Is the supply of the Products GST-free under section 38-2 of the GST Act?

Summary

The supply of the Products is not GST-free under section 38-2 of the GST Act as the Products are excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. The Products are considered to be confectionery and fall under item 8 in the table in clause 1 of Schedule 1 to the GST Act (item 8).

Detailed reasoning

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 it 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 (whetheror not requiring processing or treatment)', (paragraph 38-4(1)(a) of the GST Act).

In the present case, it is accepted that the Products are 'food for human consumption' under section 38-4 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' that is specified in clause 1 of Schedule 1 to the GST Act (Schedule 1).

The Products are not specifically listed in Schedule 1. As such, the issue is whether the Products are food 'of a kind' specified in Schedule 1.

The item listed in Schedule 1 that is of relevance in this case is item 8. Item 8 lists 'confectionery, food marketed as confectionery, food marketed as ingredients for confectionery, or food consisting principally of confectionery'.

The term 'confectionery' is not defined in the GST Act and therefore it takes its ordinary meaning. 'Confectionery' is defined in theMacmillan Publishers Australia, The Macquarie Dictionary online, www.macquariedictionary.com.au, accessed xx May xxxx (Macquarie Dictionary) as:

1. confections or sweets collectively.

The ATO view on confectionery is outlined in Issue 12 of the Food Industry Partnership - Issues Register (Issue 12).

Issue 12 states in part:

Paragraph 1.44 of the Further Supplementary Explanatory Memorandum to the GST Bill ('the EM') provides that Schedule 1 lists certain products that will be taxed as confectionery. This list is essentially the same as the definition of confectionery used in the wholesale sales tax (WST) legislation.

Paragraph 1.45 of the EM goes on to say:

'Confectionery includes food that is marketed as confectionery, such as chocolate, boiled sweets, lollipops, sherbet, marshmallow and fruit lollies, as well as the specific types of goods included in Schedule 1.'

...

There are a number of court cases that assist in determining whether a product is confectionery. The reasoning in Zeroz Pty Ltd v DFC of T 97 ATC 4277 and the decisions in Allied Mills Industries v FC of T 87 ATC 4387 and Candy Maid Confections v Customs & Excise Commissioners (1969) 1 Ch. 6111 lead to the conclusion that the word 'confectionery' must be given its ordinary meaning.

...

Aickin J in the High Court decision Landau and Anor. v Goldwater and Anor. 13 ALR 192 gave a general description of confectionery:

'one of common usage which embraces a wide variety of articles, many readily recognisable as examples of confectionery. They are primarily small articles of a sweet character containing substantial amounts of sugar and regarded as being in the nature of a delicacy in whatever quantity they may be consumed. There is, however, no doubt that in the ordinary parlance the term would now include blocks of chocolate, however small or however large.'

Additionally, the Detailed Food List (DFL), which is a public ruling for the purposes of the Taxation Administration Act 1953 includes the following entries:

Table 1: The Detailed Food List (DFL) which is a public ruling for the purposes of the Taxation Administration Act 1953 includes the following entries:

Application of the law to the Products

The Products' ingredients include mainly dairy based products and sugar. Once the ingredients are cooked, the Products are cut into square and rectangular pieces or shaped into round balls.

The Products are desserts that have a sweet character and are in the nature of delicacy. The products are commonly described as having fudge-like consistency or texture.

Based on the information provided, it is considered that the Products have sufficient qualities to be considered food 'of a kind' of confectionery under item 8. Accordingly, the supply of the Products is not GST-free under section 38-2 of the GST Act as the Products are excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. The supply of the Products therefore is a taxable supply and subject to GST.

Question 2

Is the importation of the Products a taxable importation under section 13-5 of the GST Act?

Summary

Your importation of the Products is a taxable importation under section 13-5 of the GST Act.

The importation is not a non-taxable importation under section 13-10 of the GST Act because:

1. the Products do not fall within any of the items listed in Schedule 4 to the Customs Tariff Act 1995 that are referred to in subsection 42-5(1) of the GST Act, and
2. the supply of the Products would not be GST-free or input taxed if the importation had been a supply.

Detailed reasoning

GST is payable on taxable importations. Section 13-5 of the GST Act provides that you make a taxable importation if:

1. goods are imported, and
2. you enter 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. Section 13-10 of the GST Act provides that an importation is a non-taxable importation if:

a.    it is a non-taxable importation under Part 3-2 (Division 42) of the GST Act, or

b.    it would have been a supply that was GST-free or input taxed if it had been a supply.

Subsection 42-5(1) of the GST Act refers to items that are listed in Schedule 4 to the Customs Tariff Act 1995 in respect of which no GST is payable on an importation if the goods are covered by one of the items.

The Products do not fall within any of the items listed in Schedule 4 to the Customs Tariff Act 1995 that are referred to in subsection 42-5(1) of the GST Act. The other subsections of section 42-5 of the GST Act are not relevant in this case. Accordingly, the importation of the Products is not a non-taxable importation under paragraph 13-10(a) of the GST Act.

As advised in our response to Question 1, the supply of the Products would not be GST-free under section 38-2 of the GST Act. There is no other provision in the GST Act under which the supply of the Products would be GST-free or input taxed. Therefore, the importation of the Products is not a non-taxable importation under paragraph 13-10(b) of the GST Act. Consequently, the importation of the Products is a taxable importation.