ATO ID 2004/442: GST and wafer paper sheets
Date of decision: 4 October 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 wafer paper sheets?

Decision
No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies wafer paper sheets. 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 edible wafer paper sheets. The wafer paper sheets are made of potato starch and a little vegetable oil to assist with rolling the wafer paper into sheets. The wafer paper sheets are used in the manufacture of confectionery by placing the sheets on the top and bottom of confectionery to stop the confectionery from sticking to the outer wrapping. The wafer paper sheets are marketed as ingredients for confectionery. 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 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). Wafer paper sheets are ingredients for food for human consumption and therefore, satisfy the definition of food in paragraph 38-4(1)(b) 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 that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 8 in Schedule 1 (Item 8) lists confectionery, food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery. Wafer paper sheets are used in the manufacture of confectionery and are marketed as ingredients for confectionery. As such, wafer paper sheets are covered by Item 8 and their supply is excluded from being GST-free by the operation of paragraph 38-3(1)(c) 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 of wafer paper sheets is neither GST-free under any other provision of 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 wafer paper sheets.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(b) Division 40 Schedule 1 clause 1 Schedule 1 clause 1 item 8
Subject references: Goods and services tax GST free GST food Food for human consumption Taxable supply