ATO ID 2001/793: GST and pearl oyster meat
Date of decision: 13 November 2001
Business line: Indirect Tax

Issue
Is the entity, the operator of a cultured pearl business, 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 sells pearl oyster meat?

Decision
Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells pearl oyster meat.

Facts
The entity operates a cultured pearl business. The entity grows pearl oysters, to obtain cultured pearls. In addition to selling cultured pearls, the entity also sells pearl oyster meat. The life of the pearl oyster is approximately 3 years. At the end of its life the oyster is removed from its shell, sun dried on racks and then sold as food for human consumption. The meat is considered to be a delicacy. The pearl oyster meat is not sold for consumption on the premises from which it is supplied nor is it sold hot for consumption away from those premises. 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 does not come within any of the exclusions in section 38-3 of the GST Act. The meaning of food in section 38-4 of the GST Act includes food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act). In this case, although the pearl oyster is initially used to grow cultured pearls, the pearl oyster is ultimately supplied as food for human consumption. Therefore, the pearl oyster meat satisfies the definition of food contained in paragraph 38-4(1)(a) of the GST Act. 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). However, pearl oyster meat is not covered by any of the items in Schedule 1. In addition, the supply of pearl oyster meat 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 sells pearl oyster meat.

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)(a) Schedule 1 clause 1
Other references: Food Index - GST Status of Items Food Issues Register - Issue No. 22
Subject references: Goods & services tax GST free GST food Food for human consumption