ATO ID 2004/645: GST and fruit preserved in brine
Date of decision: 30 January 2003
Business line: Indirect Tax

Issue
Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells fruit preserved in brine that must be cleaned before it is ready for consumption?

Decision
Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells fruit preserved in brine that must be cleaned before it is ready for consumption.

Facts
The entity is a food supplier and supplies fruit preserved in brine. The raw fruit is supplied in a sulphur dioxide brine solution for preservation and bleaching. The preserved fruit is whole and is not crystallised, glace or drained. Before the preserved fruit can be consumed, it must go through a cleaning process to remove the brine solution. After the cleaning process is completed the fruit is ready for human consumption. The entity is registered for goods and services tax (GST).

Reasons for decision
Summary: 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 entity is supplying fruit that requires processing to remove the sulphur dioxide, before it can be consumed. Although the fruit requires processing, it is still food for human consumption and as such, is food as defined in section 38-4 of the GST Act. 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 the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 12 of Schedule 1 (Item 12) lists crystallised fruit, glace fruit or drained fruit. As the fruit preserved in brine is not crystallised, glace or drained, it is not covered by Item 12. The fruit is not covered by any other item in Schedule 1 and therefore, its supply is not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. In addition, the supply of fruit preserved in brine does not fall within any of the other exclusions listed in section 38-3 of the GST Act. Accordingly, the entity is making a GST-free supply under section 38-2 of the GST Act.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) Schedule 1 clause 1 table item 12
Related ATO interpretative decisions: ATO ID 2001/473
Subject references: Goods and services tax GST free GST food Food for human consumption Non-taxable importations