ATO ID 2004/37: GST and edible massage oils and lotions
Date of decision: 27 September 2002
Business line: Indirect Tax

Issue
Is the entity, a retailer, 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 edible massage oils and lotions?

Decision
No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies edible massage oils and lotions. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts
The entity is a retailer. The entity supplies edible massage oils and lotions. The ingredients, which include vegetable oil or fruit juice, flavours, vegetable gum, water and preservatives, are common to a variety of foods. The oils and lotions are marketed as edible massage oils and lotions and are labelled as a massage aid, to be applied to the human body. 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 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, ingredients for food for human consumption, beverages for food for human consumption, ingredients for beverages for food for human consumption, and goods to be mixed with or added to food for human consumption. Some food products have alternative non-food uses. A product that is indicated to be for a use other than food cannot be a supply of food for the purposes of the GST Act, even if it is identical in substance to a GST-free food product. In determining whether a supply is a supply of a GST-free food, it is not only the physical characteristics of the product that are important but also the nature of the supply. Some of the ways in which a dual-purpose food product could be considered to be differentiated for non-food use are: The oils and lotions are marketed as edible massage oils or lotions and are labelled as an aid to massage, for application to the human body. As such, the oils and lotions have been designated as an aid to massage and not food. Further, the massage oils and lotions are labelled and marketed as a non-food product. Therefore, the entity is supplying products, the contents of which are edible, as something other than food. Accordingly, the supply of edible massage products is not a supply of 'food' as defined. The nature of this supply is more accurately characterised as a supply of massage products. The fact that the products are edible due to the nature of their ingredients does not change the nature of the supply or lead to the conclusion that the products are food. This is irrespective of the fact that some of the products may be consumed during use. 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 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 edible massage oils and lotions.

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 Division 40
Subject references: Goods and services tax GST free GST food Food for human consumption GST supply Taxable supply