ATO ID 2002/912: GST and the supply of food grade fish as bait
Date of decision: 15 January 2002
Business line: Indirect Tax

Issue
Is the entity, a commercial fisherman, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when they supply food grade fish as bait?

Decision
No, the entity is not making a GST-free supply under section 38-2 of the GST Act, when they supply food grade fish as bait. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts
The entity is a commercial fisherman. The entity supplies fresh, unprocessed, food grade fish as bait. The fish are not alive when sold. 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 food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act). The entity is supplying food grade fish, which is fit for human consumption. However, the entity is not supplying the fish as food for human consumption. The entity is supplying the fish as bait. If a supplier differentiates a product to be supplied as food from a product to be supplied for industrial or other non-food uses, the latter supply is not considered to be a GST-free supply of food under section 38-2 of the GST Act. Some of the ways in which a dual-purpose food product is considered to be differentiated for a non-food use are: Although the entity is supplying fish that is food grade and could be used as food for human consumption, it has differentiated the product by supplying it as bait. As such, the supply of the fish is not a supply of food for human consumption despite the fact that the fish is of food grade quality, and therefore, does not amount to food for the purposes of section 38-4 of the GST Act. Accordingly, the entity is not making a GST-free supply under section 38-2 of the GST Act when they sell food grade fish as bait. 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 of the other provisions 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 they sell food grade fish as bait.

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)(a) Division 40
Subject references: Goods & services tax GST free GST food Food for human consumption GST supplies & acquisitions Taxable supply