ATO ID 2002/1047: GST and hydroponically grown herb plant
Date of decision: 22 February 2002
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 supplies a hydroponically grown herb plant with its roots attached?

Decision
Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies a hydroponically grown herb plant with its roots attached.

Facts
The entity is a food supplier. The entity supplies a hydroponically grown herb plant ('hydroponic plant') with roots attached. Hydroponically grown plants are grown in sand, gravel or liquid without soil and with added nutrients. The hydroponic plant is placed in a plastic bag that is labelled with instructions and refrigerated. The hydroponic plant can be consumed as food for human consumption. The hydroponic plant is not provided for consumption on the premises from which it is supplied. 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 (paragraph 38-4(1)(a) of the GST Act). However, under paragraph 38-4(1)(i) of the GST Act, plants under cultivation that can be consumed (without being subject to further process or treatment) as food for human consumption are not included in the definition of food. The hydroponic plant can be consumed as food for human consumption. Therefore, it is necessary to determine whether the hydroponic plant is a 'plant under cultivation'. The phrase 'plants under cultivation' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that phrase. The Macquarie Dictionary (1997) defines 'cultivation' to mean: '1. the act or art of cultivating. 2. the state of being cultivated'. 'Cultivated and cultivating' is defined to mean: 'to promote or improve the growth of (a plant, etc) by labour and attention'. The entity supplies a hydroponically grown herb plant with its roots attached. As the hydroponic plant is not supplied in the medium in which it is grown (sand, gravel or liquid), there is no promotion of growth of the hydroponic plant. Instead, the hydroponic plant is placed in a plastic bag that is labelled with instructions and refrigerated. Therefore, it is not a plant under cultivation. As such, it is not excluded from the definition of food for human consumption in paragraph 38-4(1)(a) 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 specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). The hydroponic plant is not specified in Schedule 1. Further, the hydroponic plant is not provided for consumption on the premises from which it is supplied and does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies a hydroponically grown herb plant with its roots attached.

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) paragraph 38-4(1)(i) Schedule 1 clause 1
Subject references: Goods and services tax GST free GST food Food for human consumption Plants under cultivation