ATO ID 2004/48: GST and sodium metabisulphite
Date of decision: 23 January 2002
Business line: Indirect Tax

Issue
Is the entity, a wholesale 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 sodium metabisulphite that is not packaged or marketed for retail sale?

Decision
No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies sodium metabisulphite that is not packaged or marketed for retail sale. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts
The entity is a wholesale food supplier. The entity sells sodium metabisulphite. Sodium metabisulphite is a food preservative used in the preparation of foods such as smallgoods, seafood, fruits and vegetables, pastry items and home brew products. Sodium metabisulphite has no measurable nutritional value. At the time of supply sodium metabisulphite is not packaged or marketed for retail sale. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.

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). Sodium metabisulphite is a food preservative used in the preparation of foods such as smallgoods, seafood, fruits and vegetables, pastry items and home brew products. Therefore, sodium metabisulphite is an ingredient for food for human consumption under paragraph 38-4(1)(b) of the GST Act. However, under paragraph 38-3(1)(e) of the GST Act a supply is not GST-free under section 38-2 of the GST Act if it is a supply of 'food of a kind specified in regulations made for the purposes of this subsection'. Regulation 38-3.02 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations), effective from 1 December 2001, deals with food additives. This regulation gives effect to paragraph 38-3(1)(e) of the GST Act and determines those foods that are not GST-free. Subregulation 38-3.02(1) of the GST Regulations provides that food additives, other than exempt food additives, are not GST-free. Although the term 'food additive' is used in the regulation, it is not defined elsewhere in the GST Act. The word 'additive' is defined in The Macquarie Dictionary 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales to mean '...a substance added to a product, usually to preserve or improve its quality'. Examples of products that are considered to be additives for GST purposes include colourings, flavourings, preservatives, antioxidants, sweeteners, vitamins, minerals and modifying agents. As sodium metabisulphite is a food preservative it comes within the definition of 'additive' and is therefore a food additive for GST purposes. Subregulation 38-3.02(2) of the GST Regulations provides that some food additives are exempt food additives, the supply of which, will be GST-free. Under paragraph 38-3.02(2)(a) of the GST Regulations, a food additive which, at the time of supply, is packaged and marketed for retail sale is an exempt food additive. The entity is a wholesaler, and does not package or market sodium metabisulphite for retail sale at the time of supply. Therefore, the sodium metabisulphite supplied by the entity is not an exempt food additive under paragraph 38-3.02(2)(a) of the GST Regulations. To be considered an exempt food additive under paragraph 38-3.02(2)(b) of the Regulations, sodium metabisulphite must: Sodium metabisulphite has no measurable nutritional value. Therefore, sodium metabisulphite is not an exempt food additive under 38-3.02(2)(b) of the GST Regulations. As sodium metabisulphite is a supply of food of a kind specified in the GST Regulations, the supply of it is excluded from being GST-free by paragraph 38-3(1)(e) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision in Division 38 of the GST Act, nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies sodium metabisulphite that is not packaged or marketed for retail sale.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(e) section 38-4 paragraph 38-4(1)(b)
Other references: The Macquarie Dictionary 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales
Subject references: Goods and services tax GST free GST food Ingredients for food Food additives GST supplies & acquisitions Taxable supply