Edited version of private advice

Authorisation Number: 1052250177232

Date of advice: 13 May 2024

Ruling

Subject: GST - food classification

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

No.

Relevant facts and circumstances

The entity is registered for GST.

The Product consists of two food items. The Product is supplied in a container which has two compartments to separately hold the two items.

The entity provided an image of the Product.

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

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' that is 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 (combination food).

While the Product is not food of a kind that is specified in Schedule 1, it must be determined whether it is a combination food. The Product consists of two food items. The Detailed Food List, which is a public ruling for the purposes of the Taxation Administration Act 1953 specifies the first food item (Food item 1) as being GST-free and the second food item (Food item 2) as being taxable. Food item 2 is taxable because it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1)

Goods and Services Tax Determination GSTD 2024/1 provides the Commissioner's view when a supply is a supply of combination food for the purposes of paragraph 38-3(1)(c) of the GST Act.

Paragraph 11 of GSTD 2024/1 provides the Commissioner's view that the following principles apply when determining whether there is a supply of combination food:

• There must be at least one separately identifiable taxable food.
• The separately identifiable taxable food must be sufficiently joined together with the other components of the overall product at the time of sale.
• The separately identifiable taxable food must not be so integrated into the overall product, or be so insignificant within that product, that it has no effect on its characterisation.

Separately identifiable taxable food

A food is separately identifiable when it can be individually perceived by ordinary visual inspection.

To be capable of being individually perceived by ordinary visual inspection, the taxable food must be capable of being seen by a person looking carefully at the food. This may involve some interaction with the food, including removing packaging and moving components to view different aspects of the food. This does not extend to taxable food that can only be seen or detected with the use of special equipment.

The taxable food does not need to be physically separated from the other components (for example, in separate compartments) to be separately identifiable, nor does it need to be capable of being eaten separately.

Based on the images of the Product that you provided, Food item 2 can be separately identifiable.

Sufficiently joined together

To be a supply of a combination food, the separately identifiable taxable food must be sufficiently joined together with the other components of the overall product at the time of sale. To be sufficiently joined together, the components must be supplied as a single item for consumption, as opposed to 2 or more distinct supplies of food made at the same time

The components of the combination food do not need to be physically mixed, whether at the time of sale or afterwards, for the taxable food to be sufficiently joined together with the other components of the overall product.

Whether or not separately identifiable foods are joined together so that they are a combination food is a matter of overall impression determined at the time of sale. Relevant factors include physical appearance and packaging, labelling, marketing, product design, manner of sale and consumer experience. No one factor is necessarily determinative, and the individual weighting of each factor will depend on the circumstances of each case.

The components of the Product, being Food item 1 and Food item 2 are supplied as a single item as opposed to two distinct supplies of food made at the same time.

The Product is supplied in a single container notwithstanding that the food items are contained in separate compartments of the container. The labelling of the Product indicates that the food items are supplied together in a single container. The food items that make up the Product are together marketed and sold as a single item intended to be consumed together. Therefore, we consider that Food item 2 is sufficiently joined together with Food item 1 to make up the Product.

So integrated into or insignificant within the overall product

There will be cases where the separately identifiable taxable food is so integrated into the overall product, or is so insignificant within that product, that it would not affect its characterisation. For example, food may be so insignificant where it is merely an incidental accompaniment to the product.

The questions of integration and significance require a qualitative assessment and are a matter of overall impression. There is no bright-line test (for example, no minimum weight or volume, or percentage quantity) for determining when a taxable food will be so integrated or so insignificant that the overall product does not have the character of being a combination food.

The physical appearance of the Product shows that Food item 2 is neither so integrated into the Product, nor so insignificant within the Product for it not to affect the characterisation of the Product.

Based on the above, we consider the Product to be combination food with one of the components, the sprinkles, being food of a kind specified under item 14 of Schedule 1. Therefore, the supply of the Product is excluded by paragraph 38-3(1)(c) of the GST Act from being GST-free. The supply of the Product is a taxable supply under section 9-5 of the GST Act.