Private ruling: GST and nutritional supplement
Date of advice: 26 November 2020
Published: January 2021

Ruling: Q2: Is GST payable on the sale of a specified product (the Product) to Australian customers? | A1: Yes.

Relevant facts and circumstances: You are registered for goods and services tax (GST). You sell fitness health supplements to online customers and retail outlets. The Product is to promote muscle growth and health benefits. The Product is prepared by mixing with water or milk. You provided pictures of the packaging and labelling of the Product. The labelling includes a list of the ingredients of the Product and the recommended serving size. The labelling provides that the Product is not to be used as sole source of nutrition and that the Product must be used in conjunction with a balanced diet and a suitable physical training or exercise program. The labelling also contains the following warnings: • Keep out of reach of children. • Not suitable for children under a specific age. • Not suitable for pregnant women. • Should only be used under medical or dietetic advice. The Product is manufactured by combining raw ingredients through a mixing machine. No process alters the state of the raw ingredients. The Product is marketed on your website and social media sites, as well as by sponsored athletes/influencers on social media.

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 Section 38-4 | A New Tax System (Goods and Services Tax) Act 1999 Section 9-5

Reasons for decision: Summary: The supply of the Product is not GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as the Product is a nutritional supplement and therefore does not satisfy the definition of food in subsection 38-4(1) of the GST Act. The supply of the Product is a taxable supply as it meets all the requirements of section 9-5 of the GST Act. | Detailed Reasoning - Detailed Reasoning: 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 subsection 38-4(1) 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) • ingredients for food for human consumption (paragraph 38-4(1)(b) of the GST Act) The word 'food' in paragraph 38-4(1)(a) is not defined in the GST Act and so takes its ordinary meaning. Macmillan Publishers Australia,The Macquarie Dictionary online, www.macquariedictionary.com.au , viewed 10 November 2020, defines 'food' as: 1. what is eaten, or taken into the body, for nourishment. Issue 18 of the Food Industry Partnership - issues register, which considers whether psyllium seed husks are food for the purposes of the GST Act, highlights that 'not all substances that provide nourishment will satisfy the definition of food in the GST Act'. Further the Detailed Food List which is a public ruling for the purposes of the Taxation Administration Act 1953 provides that the supply of nutritional supplements is a taxable supply. Based on the information provided the Product is sold for its nutritional value and not primarily marketed as a food. The Product is specifically marketed for use by athletes as a formulated supplementary sports food. The labelling provides that the Product is a formulated supplementary sports food and is not to be used as sole source of nutrition. The labelling also provides that the Product must be used in conjunction with a balanced diet and a suitable physical training or exercise program. The labelling also contains the following warnings: • Keep out of reach of children. • Not suitable for children under a specific age. • Not suitable for pregnant women. • Should only be used under medical or dietetic advice. Based on the above information we consider that the essential character of the Product is not that of food but of a nutritional supplement. Therefore, for GST purposes, the Product is not considered to be food for human consumption under paragraph 38-4(1)(a) of the GST Act or an ingredient for food for human consumption under paragraph 38-4(1)(b) of the GST Act. This means that you are not making a GST-free supply under section 38-2 of the GST Act when you supply the Product. Section 9-5 of the GST Act states: You make a taxable supply if: (a) you make the supply for consideration; and (b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and (c) the supply is *connected with the indirect tax zone; and (d) you are * registered, or * required to be registered. However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed. (* denotes a term defined in section 195-1 of the GST Act) You are 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 provisions in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, you are making a taxable supply under section 9-5 of the GST Act when you supply the Product.