Private ruling: GST and food colourings
Date of advice: 21 April 2021
Published: June 2021

Ruling: Q1: Is your supply of the Food Colouring Products a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No. | Q2: Is your supply of dehydrated ingredients (Dehydrated) a GST-free supply under section 38-2 of the GST Act? | A2: Yes. | Q3: Is your importation of the Food Colouring Products a non-taxable importation under section of the GST Act? | A3: No. | Q4: Is your importation of the Dehydrated a non-taxable importation under section 13-10 of the GST Act? | A4: Yes

Relevant facts and circumstances: You are registered for goods and services tax (GST). The Dehydrated ingredients (Dehydrated) are for adding to food. The Colouring Products are recommended for use predominantly in food for human consumption. They are marketed for use in manufacturing process of food including confectionery. You import the Products into Australia for wholesale purposes. You have provided product information with nutritional tables from the manufacturer. The Products are not packaged and marketed for retail sale. The Products are supplied in bulk to wholesalers. The Colouring Products are predominantly used in the food industry as a food additive, including confectionery. The Product has applications outside the food industry. When you sell the Food Colouring Products for alternative non-food uses you do not differentiate the Products in any way (for example, by the manner of their packaging and labelling) from the way you sell the Products for food colouring. You sell the Food Colouring Products for alternative non-food uses in the same way as you sell them for food uses.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 (GST Act): section 38-2 | section 38-3 | paragraph 38-3(1)(c) | section 38-4 | paragraph 38-4(1)(b) | section 9-5 | section 13-5 | section 13-10 | Schedule 1 clause 1 table item 8

Reasons for decision: Summary: The supply of the Food Colourings and the Dehydrated : The Food Colourings Products have been marketed as colours used in the manufacturing of confectionery (for example: ....). The Food Colouring Products are food of a kind specified under item 8 of Schedule 1 of the GST Act (Schedule 1) - food marketed as ingredients for confectionery. The supply of the Food Colouring Products is a supply that is not GST-free under section 38-2 of the GST Act as the Products are not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act (food of a kind that is specified in Schedule 1). The supply of Dehydrated is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) because: • The Product satisfies the definition of ingredients for food in paragraph 38-4(1)(b) of the GST Act as food for human consumption and • the supply of the Product does not fall within any other exclusions in section 38-3 of the GST Act. | Detailed Reasoning - The importation of the Food Colouring Products and the Dehydrated:: The importation of the Food Colouring Products does not meet the requirement of subsection 13-10(b) of the GST Act because the supply of the Food Colouring Products is not GST-free. Hence your importation of the Food Colouring Products is a taxable importation under subsection 13-5 (1) of the GST Act. Since the supply of the Dehydrated Product is GST-free, your importation of the Dehydrated Product is a non-taxable importation under paragraph 13-10(b) 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 as: (a) food for human consumption (whether or not requiring processing or treatment); (b) ingredients for food for human consumption; ... (e) goods to be mixed with or added to food for human consumption (including condiments, spices, seasonings, sweetening agents or flavourings); ..... | Detailed Reasoning - A. The supply of the Food Colouring Products:: Food colouring is used in the manufacture of foods. The Food Colouring Products are used in the manufacturing of food and beverages, hence they are considered ingredient for food for human consumption and therefore satisfy the definition of food in paragraph 38-4(1)(b) of the GST Act, or a good to be mixed with or added to food for human consumption (including condiments, spices, seasonings, sweetening agents or flavourings) under paragraph 38-4(1) (e) of the GST Act. The Food Industry Partnership- issues register in Issue 11 includes 'colourings' in examples of Food additives and state that additives can fall within the term 'ingredient for food for human consumption' as stated in paragraph 38-4(1)(b): https://www.ato.gov.au/Business/GST/In-detail/GST-issues-registers/Food-Industry-Partnership---issues-register/?page=10#Issue_11 The word 'additive' is defined in The Macquarie Dictionary (3rd edition, 1997) to mean '...3. a substance added to a product, usually to preserve or improve its quality'. Examples of products that are considered to be food additives for GST purposes include: • colourings • flavourings • preservatives • antioxidants • sweeteners • vitamins • minerals • modifying agents (vegetable gums, mineral salts, food acids, emulsifiers, humectants, thickeners) Some of these additives fall within the term 'ingredient for food for human consumption' as stated in paragraph 38-4(1)(b), whilst others are specifically included in paragraph of the GST Act as 'goods to be mixed with or added to food for human consumption'. Those products included in paragraph 38-4(1)(e) of the GST Act include: • condiments (for example, tomato sauce, jam, chutney) • spices (for example, pepper, cinnamon, cloves) • seasonings • sweetening agents • flavourings (for example, vanilla essence). Products that satisfy paragraph 38-4(1)(e) are used for the purpose of adding to the taste or flavour of finished foods and are not products that are used in the manufacturing process (although some products may fall for consideration as both an ingredient for food and as a good to be mixed with or added to food for human consumption)... The next thing to consider whether the Food Colouring Products fall within any of the exclusions in section 38-3 of the GST Act. Paragraph 38-3(1)(c) of the GST Act provides a supply of food is not GST-free if it is food of a kind that is specified in Schedule 1, or food that is a combination of one or more foods at least one of which is food of such a kind. The phrase 'of a kind' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that term. The Macquarie Dictionary (1997) does not define the entire phrase 'of a kind' however, it defines the word 'kind' to mean: '1. A class or group of individuals of the same nature or character, especially a natural group of animals or plants. 2. Nature or character as determining likeness or difference between things: things differing in degree rather than in kind. 3. A person or thing as being of a particular character or class: he is a strange kind of hero. 4 ...' In sales tax cases and when determining the phrase 'of a kind', the Courts have determined the 'essential character of the goods'. Essential character derives from the basic nature of the goods, from what they are, though composition, function and other factors necessarily play a part. The GST case Lansell House Pty Ltd & Anor FC of T 2010 ATC 10851 ( Lansell 2010 ) did not provide an essential character test, rather it provided an overall impression test. Sunberg J held that the words in item 32 are not used in a specialised or trade sense that differs from their ordinary usage, and that it is a matter of overall impression in deciding the proper classification of a product. In this regard, the case lawLansell House Pty Ltd & Anor v FC of T 2011 ATC 20-239 (Lansell 2011 ) at [30] relevantly provides: The use of the words "of a kind" in s 38-3(1)(c) of the GST Act adds further generality to the description of the items described in Schedule 1: Air International Pty Ltd v Chief Executive Officer of Customs (2002) 121 FCR 149 per Hill J. Thus, a new product that does not possess all of the same characteristics of known crackers may nevertheless be within the relevant item. Please note that this Federal Court decision has been upheld by the Full Federal Court, hence this quote from the Federal Court decision is still relevant. Accordingly, something will be 'of a kind' if it is of the same nature or character (possessing the same distinguishing qualities) as the thing or group in question. The Food Colouring Products are marketed for use in the manufacture of foods including confectioneries. Hence we will consider Item 8 in the table in clause 1 of Schedule 1 to the GST Act (Item 8). | Detailed Reasoning - Item 8 of Schedule 1: Item 8 lists confectionery, food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery. The Food Industry Partnership Issues Register - Issue 12 (Issue 12) on this link, discusses whether a product is confectionery: https://www.ato.gov.au/Business/GST/In-detail/GST-issues-registers/Food-Industry-Partnership---issues-register/?anchor=Issue12#Issue12 Paragraph 1.44 of the Further Supplementary Explanatory Memorandum to the GST Bill ('the EM') provides that Schedule 1 lists certain products that will be taxed as confectionery. This list is essentially the same as the definition of confectionery used in the wholesale sales tax (WST) legislation. Paragraph 1.45 of the EM goes on to say: 'Confectionery includes food that is marketed as confectionery, such as chocolate, boiled sweets, lollipops, sherbet, marshmallow and fruit lollies, as well as the specific types of goods included in Schedule 1.'.. Aickin J in the High Court decision Landau and Anor. v Goldwater and Anor. 13 ALR 192 gave a general description of confectionery: 'one of common usage which embraces a wide variety of articles, many readily recognisable as examples of confectionery. They are primarily small articles of a sweet character containing substantial amounts of sugar and regarded as being in the nature of a delicacy in whatever quantity they may be consumed.....' In determining whether food is marketed as confectionery or as an ingredient for confectionery, it is relevant to look at the uses to which the product is put. In respect of food colouring, the Detailed Food List states: https://www.ato.gov.au/Calculators-and-tools/Host/?anchor=GSTFBSearch#GSTFBSearch/questions food colouring marketed as an ingredient for confectionery Taxable Schedule 1, item 8 of the GST Act applies | Detailed Reasoning - Application to the Food Colouring Products:: The Food Colouring Products are predominantly used in the food industry as a food additive. They are used in the manufacturing process of food and beverages. However, the Products have applications for alternative non-food uses, for example.... When you sell the Food Colouring Products for alternative non-food uses you do not differentiate the Products in any way (for example, by the manner of their packaging and labelling) from the way you sell the Products for food colouring in food for human consumption. The Food Colouring Products are marketed on your website as applied in making confectioneries such as... The above types are examples of confectionery per Issue 12. The Food Colouring Products are packaged and marketed as food colouring to be used in the manufacturing of food including confectionery. The Food Colouring Products are also marketed for use in other industries. As these Food Colouring Products have been marketed as a kind of ingredient for confectionery, the DFL entry for Food Colouring - marketed as an ingredient for confectionery applies to say that Food Colouring Products are listed under Item 8 as a kind of food marketed as ingredients for confectionery. Hence the supply of the Colouring Products is not a GST-free supply. | Detailed Reasoning - Question B: The supply of Dehydrated Product: Dehydrated food ingredients would be considered ingredients for food for human consumption under section 38-4(1)(b). Relevantly pursuant to section 38-3 food is not GST-free where: (1) A supply is not GST-free under section 38-2 if it is a supply of: ... (c) food of a kind specified in the third column of the table in clause 1 of Schedule 1, or food that is a combination of one or more foods at least one of which is food of such a kind... It follows that the supply of Dehydrated food will be GST-free unless the food is a kind of food listed in Schedule 1. Application: used as ingredient in foods, for example, ... The supply of Dehydrated food is GST-free under section 38-2 of the GST Act because: • Dehydrated food satisfies the definition of ingredients for food in paragraph 38-4(1)(b) of the GST Act as food for human consumption and, • the supply of Dehydrated food does not fall within any other exclusions in section 38-3 of the GST Act. | Detailed Reasoning - Question C and D: The importation of the Food Colouring Products and Dehydrated Product:: GST is payable on taxable importations. Section 13-5 of the GST Act provides that you make a taxable importation if: • goods are imported; and • you enter the goods for home consumption (within the meaning of the Customs Act 1901). We consider that the Products are imported goods. Therefore paragraph 13-5(1)(a) of the GST Act is satisfied. You acquire the Products from the suppliers overseas and import them into Australia. Hence you meet the requirement of paragraph 13-5(1)(b) of the GST Act as you are the entity that enters the goods for home consumption. However, the importation is not a taxable importation to the extent that it is a non-taxable importation. Section 13-10 of the GST Act provides that an importation is a non-taxable importation if: a) it is a non-taxable importation under Part 3-2 of the GST Act; or b) it would have been a supply that was GST-free or input taxed if it had been a supply. The importation of the Products is not a non-taxable importation under paragraph 13-10 (a) of the GST Act. Next, we consider paragraph 13-10 (b) of the GST Act. | Detailed Reasoning - Question C: Food Colouring Products:: The importation of the Food Colouring Products does not meet the requirement of subsection 13-10(b) of the GST Act because the supply of the Food Colouring Products is not GST-free. Hence it is a taxable importation under subsection 13-5 (1) of the GST Act. | Detailed Reasoning - Question D: Dehydrated Food:: The supply of Dehydrated food is GST-free under section 38-2 of the GST Act. Since the supply of the Product is GST-free, your importation of the Dehydrated food is a non-taxable importation under subsection 13-10(b) of the GST Act.