ATO ID 2001/562: GST and the sale of culinary herbs
Date of decision: 7 August 2001
Business line: Indirect Tax

Issue
Is the entity, a herb grower, 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 culinary herbs?

Decision
Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells culinary herbs.

Facts
The entity is a herb grower. The entity sells culinary herbs which it labels and markets as being culinary herbs. These herbs are sold to buyers who use them for a range of purposes, from food manufacture to herbal medicines. Culinary herbs are those herbs that are consumed primarily for culinary purposes, and are not consumed for their actual or perceived medicinal or therapeutic properties (that is, they are not consumed principally for medicinal or therapeutic reasons). Culinary herbs are usually used as an ingredient or additive in food rather than consumed as food on their own. They are added to food to enhance the flavour either during the preparation process or once the food item is complete. 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 provided that it does not come within any of the exclusions listed in section 38-3 of the GST Act. Herbs can have both culinary and medicinal uses. Therefore, it is necessary to determine if herbs are food for the purposes of the GST Act. Food is defined in section 38-4 of the GST Act to include: As the phrase 'food for human consumption' is not defined in the GST Act, it takes on its ordinary meaning. It is considered that the ordinary meaning of the phrase 'food for human consumption' would exclude products that are principally consumed for medicinal or therapeutic purposes. The herbs that are being sold by the entity are culinary herbs. Culinary herbs are those herbs that are consumed primarily for culinary purposes. These herbs are usually used as an ingredient or additive in food rather than consumed as food on their own. They are added to food to enhance the flavour either during the preparation process or once the food item is complete. As the herbs have been labelled and marketed as being culinary herbs, it is clear that the intention of the entity is to sell herbs which are intended to be used primarily for culinary purposes and not for medicinal or therapeutic purposes. Therefore, culinary herbs are food under paragraphs 38-4(1)(b) and 38-4(1)(e) 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 that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Culinary herbs are not specifically listed in Schedule 1, nor are they food of a kind specified in Schedule 1. In addition, the supply of culinary herbs 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 sells culinary herbs.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 pargraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) paragraph 38-4(1)(b) paragraph 38-4(1)(e) Schedule 1 clause 1
Related ATO interpretative decisions: ATO ID 2001/563
Subject references: Goods & services tax GST free GST food Food for human consumption Food seasoning Ingredients for food