ATO ID 2004/444: GST and supply of a meat cure
Date of decision: 8 July 2003
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 sells a meat cure?

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

Facts
The entity is a food supplier and sells meat cure. The product is supplied for use solely in the manufacture of ham and bacon, of which the curing process is an essential part. The meat cure consists of measurable amounts of various ingredients including protein, sugar and salt. The product is not packaged and marketed for retail sale at the time of supply. 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 meat cure is an ingredient for food for human consumption and therefore satisfies the definition of food in 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 if it is food of a kind specified in regulations made for the purposes of subsection 38-3(1) of the GST Act. 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, will not be 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'. The meat cure is a preservative as 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 does not package or market the product for retail sale at the time of supply. Therefore, the meat cure 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 GST Regulations, meat cure must: The ingredients in the meat cure include measurable amounts of protein, sugar and salt. Therefore, the meat cure has measurable nutritional value for GST purposes. The entity supplies the product for use solely in the manufacture of ham and bacon. Therefore, this product is supplied by the entity for use solely or predominantly in the composition of food. As the curing process is an essential part of the manufacture of ham and bacon, meat cure is an ingredient that is essential to the composition of ham and bacon products. Accordingly, the entity's product is an exempt food additive under paragraph 38-3.02(b) of the GST Regulations and it is therefore not food of a kind specified for the purposes of paragraph 38-3(1)(e) of the GST Act. In addition, the supply of the entity's product 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 the meat cure.

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 Food additives Food for human consumption Ingredients for food