ATO ID 2002/13: GST and bird's nest with sugar
Date of decision: 13 November 2001
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 bird's nest with sugar?

Decision
Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies bird's nest with sugar.

Facts
The entity is a food supplier. The entity supplies bird's nest with sugar. Bird's nest is a food ingredient derived from birds' nests. It is considered a delicacy in Chinese cooking. It can also be consumed as a tonic. The bird's nest with sugar is made of sugar solution, bird's nest and stabiliser. 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 it satisfies the definition of food in section 38-4 of the GST Act and it is not excluded by section 38-3 of the GST Act. The definition of food in section 38-4 of the GST Act includes ingredients food for human consumption (paragraph 38-4(1)(b) of the GST Act). Although bird's nest with sugar can be consumed as a tonic, it is an ingredient for food, and therefore, it is considered that bird's nest with sugar is an ingredient for food for human consumption. However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Bird's nest with sugar is not a food of a kind specified in Schedule 1. In addition, bird's nest with sugar 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 supplies bird's nest with sugar.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(b) Schedule 1 clause 1
Subject references: Goods & services tax GST free GST food Food for human consumption Ingredients for food