ATO ID 2004/463: GST and pharmaceutical white oil
Date of decision: 12 November 2002
Business line: Indirect Tax

Issue
Is the entity, a supplier of chemicals, 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 pharmaceutical white oil that is marketed as a generic product?

Decision
No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies pharmaceutical white oil that is marketed as a generic product. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts
The entity is a supplier of chemicals. The entity supplies white oil of pharmaceutical grade. The pharmaceutical white oil is approved for food contact. The pharmaceutical white oil has multiple industrial applications and is used in the pharmaceutical, cosmetic, food and packaging industries. While the pharmaceutical white oil may be used as a processing aid in food manufacture, it is supplied and marketed as a generic product. It is not marketed specifically for culinary purposes. The entity is registered for goods and services tax (GST) and 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 by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include fats and oils marketed for culinary purposes (paragraph 38-4(1)(f) of the GST Act). The word 'culinary' is not defined in the GST Act. Generally, where a word is not defined in the relevant Act, it is interpreted in accordance with its ordinary meaning. The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne defines culinary to mean 'of or for cooking or the kitchen'. Pharmaceutical white oil has multiple industrial applications and is used in the pharmaceutical, cosmetic, food and packaging industries. While the pharmaceutical white oil is used as a processing aid in food manufacture, it is supplied and marketed as a generic product rather than as a product specifically for culinary purposes. As the pharmaceutical white oil is not an oil that is marketed for culinary purposes, it does not meet the definition of food in paragraph 38-4(1)(f) of the GST Act. Therefore, the entity is not making a GST-free supply of food under section 38-2 of the GST Act when it sells pharmaceutical white oil. 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 pharmaceutical white oil that is marketed as a generic product.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 section 38-4 paragraph 38-4(1)(f) Division 40
Other references: The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne
Subject references: Goods and services tax GST food GST supplies & acquisitions Taxable supply