ATO ID 2002/1046: GST and energy/sports bars
Date of decision: 15 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 energy/sports bars?

Decision
No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies energy/sports bars. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts
The entity is a food supplier. The entity supplies energy/sports bars to health food stores, supermarkets and sports shops. The energy/sports bars are located next to or near muesli bars and health food bars, and are wrapped in similar packaging. The energy/sports bars contain some ingredients similar to those found in muesli bars and health food bars. The energy/sports bars are enriched with vitamins and minerals and supplement a healthy diet. The bars are specifically marketed for use by athletes as a formulated supplementary sports food which improves their performance. The directions for use state that the energy and sports bars are to be consumed with plenty of fluid. The bars contain a warning that they are not to be consumed by children under 15 years of age or by pregnant women. 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 food for human consumption (paragraph 38-4(1)(a) of the GST Act). Sports/energy bars are food for human consumption. Therefore they satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act. However, paragraph 38-3(1)(c) of the GST Act provides that 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). Item 11 of Schedule 1 (Item 11) provides that 'food known as muesli bars or health food bars, and similar foodstuffs' is not GST-free. First, it must be determined whether the energy/sports bars are 'food known as muesli bars or health food bars'. The energy/sports bars contain similar ingredients to muesli bars and health food bars. However, the energy/sports bars are specifically marketed for use by athletes as a formulated supplementary sports food to improve performance. The directions for use state that the energy/sports bars are to be consumed with plenty of fluid. In addition, the energy/sports bars contain a warning that they are not to be consumed by children under the age of 15 years and pregnant women. Muesli and health food bars are not specifically marketed for athletes and do not contain any warnings. Therefore, energy/sports bars are not 'food known as muesli and health food bars' despite containing some similar ingredients. The next step is to determine whether energy/sports bars are 'similar foodstuffs' to muesli and health food bars as per Item 11. The phrase 'similar foodstuffs' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that phrase. The Macquarie Dictionary (1997) defines the word 'similar' to mean 'having likeness, or resemblance, especially in a general way'. 'Foodstuff' is defined in The Macquarie Dictionary (1997) as a 'substance or material suitable for food'. Therefore, to be a similar foodstuff to muesli bars or health food bars, the energy/sports bars would need to have a general likeness or resemblance to muesli bars or health food bars. The energy/sports bars contain some ingredients similar to those found in muesli bars and health food bars, are bar shaped and wrapped in similar packaging. Therefore, the energy/sports bars are foodstuffs similar to muesli bars and health food bars and are covered by Item 11. Accordingly, the energy/sports bars are excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. This means that the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies energy/sports bars. 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 provisions 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 energy/sports bars.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) Schedule 1 clause 1 Schedule 1 clause 1 table item 11
Other references: The Macquarie Dictionary, (1997), 3rd edition, The Macquarie Library Pty Ltd, New South Wales
Subject references: Goods and services tax GST free GST food Food for human consumption Sports food