Private ruling: Goods and services tax (GST) and food feeding tube formula and oral meal replacement
Date of advice: 10 June 2016
Published: July 2016

Ruling: Q1: Is the importation of feeding tube formula and oral meal replacements Product X and Product Y (the products) non-taxable importations under section 13-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) ? | A1: Yes

Relevant facts and circumstances: You are the parent of an invalid child who has a feeding tube into their stomach and must be fed specialised formula. There are X feeding tube formula and oral meal replacements products you have to purchase for your child named X and Y which are manufactured by an overseas company. X was the first product manufactured and Y has been designed specifically for children. The products come ready for consumption in a sachet and are given via a feeding tube in your child's stomach. You provided a letter from your child's doctor stating that your child suffers reactions to baby formulas and the products have a better nutritional profile without reactions. The manufacturer's website gives the history, ingredients and nutritional values of the products. They do not need refrigeration or freezing prior to purchase but once the sachets are opened, they require refrigeration for up to 48 hours. Both products have a thick liquid consistency at room temperature. They are marketed mainly for invalid use but can be consumed by non-invalids orally.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 38-2 | A New Tax System (Goods and Services Tax) Act 1999 Section 38-3 | A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-4(1) | A New Tax System (Goods and Services Tax) Act 1999 Section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 Section 9-10 | A New Tax System (Goods and Services Tax) Act 1999 Subsection 9-30(1) | A New Tax System (Goods and Services Tax) Act 1999 Subsection 9-30(2) | A New Tax System (Goods and Services Tax) Act 1999 Division 38 | A New Tax System (Goods and Services Tax) Act 1999 Division 40 | A New Tax System (Goods and Services Tax) Act 1999 Section 13-5 | A New Tax System (Goods and Services Tax) Act 1999 Subsection 13-5(1) | A New Tax System (Goods and Services Tax) Act 1999 paragraph 13-5(1)(a) | A New Tax System (Goods and Services Tax) Act 1999 paragraph 13-5(1)(b) | A New Tax System (Goods and Services Tax) Act 1999 Section 13-10 | A New Tax System (Goods and Services Tax) Act 1999 Part 3-2 | A New Tax System (Goods and Services Tax) Act 1999 Subsection 7-1(1) | A New Tax System (Goods and Services Tax) Act 1999 Subsection 42-5(1) | A New Tax System (Goods and Services Tax) Act 1999 Subsection 42-5(1C) | A New Tax System (Goods and Services Tax) Act 1999 Schedule 1 | A New Tax System (Goods and Services Tax) Act 1999 Schedule 2

Reasons for decision: Summary: Subsection 7-1(1) of the GST Act provides that GST is payable on taxable supplies and taxable importations. Subsection 13-5(1) of the GST Act states: (1) You make a taxable importation if: (a) goods are imported; and (b) you enter the goods for home consumption (within the meaning of the Customs Act 1901 ). However, the importation is not a taxable importation to the extent that it is a non-taxable importation. You will be the importer of the products and enter them for home consumption so you satisfy paragraphs 13-5(1)(a) and 13-5(1)(b) of the GST Act. We need to consider whether the importation of the products is a non-taxable importation. The meaning of non-taxable importation is defined in section 13-10 of the GST Act as: An importation is a non-taxable importation if: (a) it is a non-taxable importation under Part 3-2; or (b) it would have been a supply that was GST-free or input taxed if it had been a supply. (a) non-taxable importation under Part 3-2 Part 3-2 of the GST Act deals with non-taxable importations. Subsection 42-5(1) of the GST Act states: An importation of goods is a non-taxable importation if the goods are covered by item 4, 8, 15, 18A, 18B, 18C, 21, 21A, 23A, 23B, 24, 25A, 25B, 25C, 32A, 32B, 33A, 33B or 64 in Schedule 4 to the Customs Tariff Act 1995 . Furthermore, subsection 42-5(1C) of the GST Act states: An importation of goods is a non-taxable importation if the goods are covered by: (a) item 1A, 1B, 1C, 1D, 1E, 5, 6, 9 or 16 in Schedule 4 to the Customs Tariff Act 1995 ; and (b) regulations made for the purposes of this subsection. The Customs Tariff Act 1995 is administered by the Australian Customs Service. Whether or not a good is covered in Schedule 4 to the Customs Tariff Act 1995 will need to be determined by them. (b) supply that was GST-free or input taxed if it had been a supply Section 9-10 of the GST Act states the meaning of supply is a supply in any form whatsoever. The supply of the products would be a supply under this section. Subsections 9-30(1) and (2) of the GST Act provides that certain supplies are GST-free and input taxed under Divisions 38 and 40 respectively. The supplies of the products are not input taxed. Under section 38-2 of the GST Act, a supply of food is GST-free. Food is defined in the GST Act to include ingredients for food for human consumption and ingredients for beverages for human consumption (see subsection 38-4(1) of the GST Act). The products are nutritional formulae. For GST purposes, they are food for human consumption or ingredients for beverages for human consumption, or both. However, section 38-3 of the GST Act qualifies the GST exemption on food and beverages. It provides that ingredients for food for human consumption will only be GST-free if they are not listed in Schedule 1 of the GST Act whilst ingredients for beverages for human consumption will only be GST-free if they are listed in Schedule 2 of the GST Act. | Detailed Reasoning - Ingredients for food for human consumption: To be GST-free, the products supplied as an ingredient for food must not be food of a kind listed in Schedule 1 to the GST Act. The only item in Schedule 1 to the GST Act that the products could come under is Item 4 'food marketed as a prepared meal, but not including soup.' The ATO view on "prepared meal" is further outlined in Goods and Service Tax Industry Issue - Detailed Food List (Detailed Food List) ruling to require the meal to: • directly competes with takeaways and restaurants, • needs refrigeration or freezing for its storage and • is marketed as a prepared meal Clause 3 of Schedule 1 to the GST Act specifically limits such prepared meals to those that require refrigeration or freezing for its storage. Also, the products do not compete with takeaways and restaurants. The unopened products have a X year shelf life at ambient temperature ie they do not need refrigeration during this time and in this condition. However, the manufacturer recommends that if storing the products after being opened, they should be placed in a covered container and held refrigerated for up to 48 hours but no longer. We take the view that such refrigeration simply extends the '12-hour ambient room temperature hang time' and the products do not require refrigeration or freezing for their storage pre-consumption. Therefore, the products supplied for use as an ingredient for food are not excluded from being GST-free. | Detailed Reasoning - Ingredients for beverages for human consumption: To be GST-free, the products supplied for use as an ingredient for drinks must be an ingredient for a beverage of a kind listed in Schedule 2 of the GST Act. Item 13 of Schedule 2 lists 'beverages, and ingredients for beverages, of a kind marketed principally as food for infants or invalids'. Ingredients for beverages Product X has a liquid consistency and Product Y can be mixed with other liquids to make beverages. We view the consumption of these products via feeding tubes an alternative route for nourishment and hydration and therefore are not precluded from being vehicles for beverages for the purposes of the GST Act. Both products are ingredients for a beverage. Marketed principally as food for infants or invalids Marketing goods principally for a particular purpose requires that purpose to be the most important purpose. In determining what a food is marketed principally for, the activities of the seller are relevant. Consideration is given to: • the name of the goods • the price of the goods • the labelling on any containers for the goods • literature or instructions packed with the goods • how the goods are packaged • how the goods are promoted or advertised, and • how the goods are distributed. The products are marketed principally as food for people suffering from conditions that require tube feeding and are under medical supervision for these conditions. Although the products can be consumed without a tube, their principal purpose and marketing is as a food for tube feeding. The Macquarie Dictionary defines 'invalid' as 1. an infirm or sickly person. Stedman's Medical Dictionary (27 th Edition) defines 'invalid' as 1. Weak; sick. 2. A person partially or completely disabled. Your invalid child's doctor has approved and supported them to take to take the products. The products are for nutrition and hydration and are ingredients for beverages that are marketed principally as food for invalids and therefore are covered by item 13 of Schedule 2 to the GST Act to make them GST-free under section 38-2 of the GST Act. Accordingly, they are non-taxable importations under section 13-5 of the GST Act.