ATO ID 2001/560: GST and supply of brood prawns
Date of decision: 1 October 2001
Business line: Indirect Tax

Issue
Is the entity, a supplier of brood prawns, making a GST-free supply under section 38-2 of the A New Tax System (Goods & Services Tax) Act 1999 (GST Act), when it sells brood prawns to produce hatchlings (larvae)?

Decision
No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells brood prawns to produce hatchlings (larvae). The entity is making a taxable supply under section 9-5 of the GST Act.

Facts
The entity is a supplier of brood prawns. The entity supplies brood prawns to a prawn hatchery. The prawn hatchery then uses the brood prawns to produce hatchlings (larvae). The entity is registered for 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 provided that it does not come within any of the exclusions listed in section 38-3 of the GST Act. Food is defined in subsection 38-4(1) of the GST Act. Paragraph 38-4(1)(a) lists food for human consumption (whether or not requiring further processing or treatment). However, paragraph 38-4(1)(g) of the GST Act provides that the definition of food does not include live animals (other than crustaceans or molluscs). Brood prawns are live animals, but as brood prawns are crustaceans they are not excluded by paragraph 38-4(1)(g) of the GST Act from being food as defined in the GST Act. However, in order to be considered food according to the definition in the GST Act, brood prawns must be supplied as food for human consumption (whether or not requiring further processing or treatment). In this case, brood prawns are supplied to produce hatchlings (larvae), rather than as food for human consumption. Therefore, the supply is not a GST-free supply of food under section 38-2 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 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 sells brood prawns to produce hatchlings (larvae).

Legislative references: A New Tax System (Goods & Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 subsection 38-4(1) paragraph 38-4(1)(a) paragraph 38-4(1)(g) Division 40
Related ATO interpretative decisions: ATO ID 2001/561
Subject references: Goods & services tax GST free GST food Food for human consumption Live animals GST primary production GST fishing Taxable supply