Edited version of private advice

Authorisation Number: 1052348277567

Date of advice: 7 March 2025

Ruling

Subject: GST - food classification

Question 1

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

Answer 1

No.

This ruling applies for the following periods:

X XXX 20XX to X XXX 20XX

The scheme commenced on

X XXX 20XX

Relevant facts and circumstances

You are registered for goods and services tax (GST).

The Product is made from the following ingredients: ingredients and packaging description provided.

The Product size and attributes description provided.

The Product manufacturing and safety details provided.

The Product is manufactured overseas.

The manufacturer does not advertise the Product.

At this stage, you will sell the Product to a particular retailer only.

The Product is sold to the XX Department of the retailer.

This Product will be displayed in the XX section of the retailer.

To promote the Product, you will be doing instore sampling at the retailer. There may be discount coupons offered or a magazine article to promote the Product, but it will be limited to the retailer only.

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 paragraph 38-3(1)(c)

A New Tax System (Goods and Services Tax) Act 1999 section 38-4

A New Tax System (Goods and Services Tax) Act 1999 paragraph 38-4(1)(a)

A New Tax System (Goods and Services Tax) Act 1999 Schedule 1

Summary

The supply of the Product is not a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as the Product is excluded from being GST-free by paragraph 38-3(1)(c). The Product is of a kind of food covered by Item 8 in the table in clause 1 of Schedule 1 (Schedule 1) which specifies confectionery, *food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery.

Detailed reasoning

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 and the supply is not excluded from being GST-free by subsection 38-3(1).

Food is defined in section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment).

The Product is food for human consumption pursuant to paragraph 38-4(1)(a) of the GST Act and therefore meets the definition of food.

Subsection 38-3 of the GST Act lists food that is not GST-free. Of relevance to the Product is paragraph 38-3(1)(c), which provides that a supply of food is not GST-free if it is food of a kind that is specified in Schedule 1, or food that is a combination of one or more foods at least one of which is food of such a kind.

'Of a kind'

The phrase 'of a kind' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that term.

The Pan Macmillan Australia, The Macquarie Dictionary online, www.macquariedictionary.com.au accessed 7 March 2025 (Macquarie Dictionary) does not define the entire phrase 'of a kind' however, it defines the word 'kind' to mean:

1. A class or group of individuals of the same nature or character, especially a natural group of animals or plants. 2. Nature or character as determining likeness or difference between things: things differing in degree rather than in kind. 3. A person or thing as being of a particular character or class: he is a strange kind of hero. 4...

In sales tax cases and when determining the phrase 'of a kind', the Courts have determined the 'essential character of the goods'. Essential character derives from the basic nature of the goods, from what they are, though composition, function and other factors necessarily play a part.

The GST case Lansell House Pty Ltd & Anor FC of T 2010 ATC 10851 (Lansell 2010) did not provide an essential character test, rather it provided an overall impression test. Sundberg J held at [108] that the words in item 32 are not used in a specialised or trade sense that differs from their ordinary usage, and that it is a matter of overall impression in deciding the proper classification of a product. Please note that this Federal Court decision has been upheld by the Full Federal Court, hence this quote from the Federal Court decision is still relevant.

In addition, the case lawLansell House Pty Ltd & Anor v FC of T 2011 ATC 20-239 (Lansell 2011) at [30] relevantly provides:

The use of the words "of a kind" in s 38-3(1)(c) of the GST Act adds further generality to the description of the items described in Schedule 1: Air International Pty Ltd v Chief Executive Officer of Customs (2002) 121 FCR 149 per Hill J. Thus, a new product that does not possess all of the same characteristics of known crackers may nevertheless be within the relevant item...

Accordingly, something will be 'of a kind' if it is of the same nature or character (possessing the same distinguishing qualities) as the thing or group in question.

The Product is made up principally of XXX XXX, and together with other ingredients, is for packaging.

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

Detailed Food List table reference supplied.

If the Product would be food that is a kind of XXX XXX or XXX XXX, it would not be GST-free as it does not contain X% XXX. Therefore, we need to determine if the Product is 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

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 the 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.

In determining whether food is marketed as a 'confectionery' or 'ingredients for confectionery' the activities of the seller are relevant. Consideration is given to the following:

•                     the name of the goods

•                     the price of the goods

•                     the labelling on any containers for the goods

•                     literature or instructions packed with the goods

•                     how the goods are packaged

•                     how the goods are promoted or advertised

•                     how the goods are distributed.

You submitted that the Product is not confectionery as it contains a small amount of sugar as an ingredient.

While the Product contains only a small amount of added sugar, the natural flavour of the fruit gives it a sweet character more than being sour. The physical appearance of the Product including its size, shape and texture gives an overall impression that the Product is confectionery. Furthermore, the Product is distributed through the confectionery department of a supermarket and is placed in the confectionery section of the store. These indicate that the Product is also marketed as confectionery. Therefore, we consider the Product to be confectionery as specified in Item 8 of Schedule 1.

As the Product is food of a kind specified in Schedule 1, it is excluded by paragraph 38-3(1)(c) of the GST Act from being GST-free under section 38-2.