ATO ID 2001/561: GST and supply of prawn larvae
Date of decision: 1 October 2001
Business line: Indirect Tax

Issue
Is the entity, a prawn hatchery, 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 prawn larvae?

Decision
No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells prawn larvae. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts
The entity is a prawn hatchery. The entity hatches the prawn larvae and then sells them. 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, 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) of the GST Act 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). The prawn larvae are live animals but as prawn larvae 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, prawn larvae must be supplied as food for human consumption (whether or not requiring further processing or treatment). Prawn larvae are not considered to be food for human consumption, as the larvae are not fully-grown and not ready for human consumption. Therefore, the supply of prawn larvae is not a GST-free supply 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 prawn 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 2001/560
Subject references: Goods & services tax GST free GST food Food for human consumption Live animals GST primary production GST fishing Taxable supply