ATO ID 2002/164: GST and virgin coconut oil
Date of decision: 4 December 2001
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 virgin coconut oil?

Decision
Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies virgin coconut oil.

Facts
The entity is a food supplier. The entity is supplying virgin coconut oil in bulk containers. The coconut oil is raw, unprocessed and solid. The virgin coconut oil is food grade and stored in sealed containers in accordance with food standards and health regulations. The oil is supplied and used as an ingredient for food for human consumption and has a wide range of other uses including in soaps, cosmetics and medicinal products. The oil is not differentiated in any way when supplied to industries other than the food industry. 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 'ingredients for food for human consumption' (paragraph 38-4(1)(b) of the GST Act). The virgin coconut oil is food grade, stored in accordance with applicable food standards and health regulations, and supplied and used as an ingredient for food for human consumption. When the virgin coconut oil is supplied to industries other than the food industry, the product is not differentiated in any way. Therefore, the virgin coconut oil that the entity is supplying is an ingredient for food for human consumption and falls within the meaning of food under paragraph 38-4(1)(b) 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 specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Virgin coconut oil is not food of a kind specified in Schedule 1. Furthermore, none of the other exclusions contained in section 38-3 of the GST Act prevent the supply of the virgin coconut oil from being GST-free. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies the virgin coconut oil.

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)(b) Schedule 1 clause 1
Subject references: Goods & services tax GST-free GST food Ingredients for food