Private ruling: Food
Published: April 2013

Ruling: Q1: Is the supply of a plant growing in a container a GST-free supply of food? Advice: No



Reasons for decision: Summary: GST is payable where you make a taxable supply. Under section 9-5 of the GST Act, 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 Australia; 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. The supply of the plants growing in a container satisfies all the criteria in section 9-5 of the GST Act. The supply is not an input taxed supply under the GST Act. As the plants growing in a container are for culinary purposes, we need to consider whether it is a GST-free food. Food for culinary purposes 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 does not come within any of the exclusions listed in section 38-3 of the GST Act. You advised that the plants growing in a container are supplied for culinary purposes as food to be mixed or added to food for human consumption. Therefore, we need to determine whether they satisfy the definition of food for GST purposes. The public ruling "Goods and Services Tax Industry Issue - Food Industry partnership - what is food? " (Food Ruling) outlines the Australian Taxation Office (ATO) view on food. Paragraphs 1 and 2 of the Food ruling state: 1. ...Food is defined in the [GST] Act to mean: § Food for human consumption (whether or not requiring further processing or treatment); § Ingredients for food for human consumption; § Beverages for human consumption (including water); § Ingredients for beverages for human consumption; § Goods to be mixed with or added to food for human consumption (including condiments, spices, seasonings, sweetening agents or flavourings); or § Fats and oils marketed for culinary purposes. 2. However, food does not include: § Live animals (other than crustaceans or molluscs); § Unprocessed cow's milk; § Any grain, cereal or sugar cane that has not been subject to any process or treatment resulting in an alteration of its form, nature or condition; or § Plants under cultivation that can be consumed (without being subject to further process or treatment) as food for human consumption. The definition of food specifically excludes "plants under cultivation" even though they can be consumed (without being subject to further process or treatment) as food for human consumption. The phrase 'plants under cultivation' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that phrase. The Macquarie Dictionary (1997) defines 'cultivation' to mean: '1. the act or art of cultivating. 2. the state of being cultivated '. And the meaning of the words "Cultivated and cultivating" in the Dictionary includes 'to promote or improve the growth of (a plant, etc) by labour and attention '. Therefore, where a plant is supplied in the medium in which it is grown, the plant is considered to be under cultivation. However, the plant is no longer under cultivation when it has been harvested as food for human consumption. The ATO view is outlined in the ruling "Goods and Services Tax Industry Issue - Food Industry partnership - Farm to 'food' product transformation" (Food Product Transformation Ruling). We enclose a copy for your reference. Paragraph 2 of the Food Product Transformation Ruling states …Therefore fruit, vegetables, herbs and spices will not be considered food for human consumption until such time as they have been harvested This is illustrated in example 1 in the ruling which states: The leaves of a herb plant can be picked and used as an ingredient for food even though the plant is growing in a container. These plants will not be GST-free. However, herbs when sold in bunches and not as part of a living plant will be GST-free. Therefore the supply of a plant growing in a container will not be GST-free. However, example 2 in the Food Product Transformation Ruling provides an explanation on plants that have been harvested for food. A hydroponic plant when harvested, packed in a plastic bag and refrigerated, is not supplied in the medium in which it is grown (sand, gravel or liquid). There is no promotion of growth of the hydroponic plant in the plastic bag. Therefore, the harvested hydroponic plant is not a plant under cultivation and satisfies the definition of food for human consumption under subsection 38-4(1) of the GST Act. In your case, the plants growing in a container are supplied foods for human consumption. However, the plants growing in a container are still in the in the medium (which they are growing) and have not been harvested. That is the plants growing in a container are plants under cultivation and are specifically excluded from the definition of food under section 38-4 of the GST Act. Section 38-2 of the GST Act does not have any application to plants under cultivation. Therefore, you are making a taxable supply under section 9-5 of the GST Act when you supply the plants under cultivation. The rulings in the register have been edited and may not contain all the factual details relevant to each decision. Do not use the register to predict ATO policy or decisions.

Disclaimer: You cannot rely on the rulings in the Register of private binding rulings in your tax affairs. You can only rely on a private ruling that we have given to you or to someone acting on your behalf. | The Register of private binding rulings is a public record of private rulings issued by the ATO. The register is an historical record of rulings, and we do not update it to reflect changes in the law or our policies. | Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: § You are registered for the goods and services tax (GST). | § You carry on an enterprise of supplying plants growing in a container. | § The plants are supplied as food for human consumption. | § The plants are not sold or promoted for medical or therapeutic purposes | § The plants are supplied in a container with the plants in the growing medium. The plants have not been harvested yet.