Private ruling: GST and food products
Published: August 2012

Ruling: Q1: Is the sale of your food products GST-free? | A1: The supply of the products having one main ingredient is GST-free. The supply of the products with more than one main ingredient is taxable.

Relevant facts and circumstances: You are registered for goods and services tax (GST). You import food products to sell. Some products are manufactured using one main ingredient while the others have more than one. All products have other ingredients in minute quantities. You have supplied examples of the products apart from one. The ingredients are mixed together (that is, no coating of one ingredient with another). There is no added sugar, the sugar content being obtained from the listed ingredients. The labelling does not market the products as confectionery. The products do not contain preservatives and are gluten free.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 13-10 | Section 38-2 | Section 38-3 | Section 38-4.

Reasons for decision: Summary: A supply of food is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) if it satisfies the definition of food in section 38-4 of the GST Act and it is not excluded 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 (paragraph 38-4(1)(a)) and ingredients for food for human consumption (paragraph 38-4(1)(b)). In your case, you are to import and sell food products. These products satisfy the definition of food because they will be sold as food for human consumption. The products do not fall within any of the exclusions in section 38-3 of the GST Act except they may possibly be captured by paragraph 38-3(1)(c). Paragraph 38-3(1)(c) of the GST Act provides that a supply of food is not GST-free if it is food of a kind that is specified in Schedule 1. Schedule 1 includes the following food items that may be of relevance when considering the GST treatment of your products: · confectionery, in particular, food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery (Item 8 of Schedule 1). Note that there are no other food products in Schedule 1 that are relevant when considering your products. | Detailed Reasoning - Confectionery: The ATO view on confectionery is given by Issue 12 of the Food Issues Register (Issue 12). Issue 12 provides that: · 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. Issue 12 also lists several court cases that assist in determining whether a product is confectionery. For example, the reasoning in Zeroz Pty Ltd v DFC of T 97 ATC 4277 and the decisions in Allied Mills Industries v FC of T 87 ATC 4387 and Candy Maid Confections v Customs & Excise Commissioners (1969) 1 Ch. 6111 lead to the conclusion that the word confectionery must be given its ordinary meaning. The ordinary meaning of confectionery given in the Macquarie Dictionary (3rd edition) is as follows: · confections or sweets collectively. Confection is in turn defined as: · … a sweet preparation (liquid or dry) of fruit or the like, as a preserve or sweetmeat. · a sweet or bonbon. Therefore, the ordinary meaning of confectionery suggests something which is sweet. Court decisions also cast some light on the meaning of confectionery. 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. There is, however, no doubt that in the ordinary parlance the term would now include blocks of chocolate, however small or however large. Further to the above, in determining whether food is marketed as a confectionery or ingredients for confectionery the activities of the seller are relevant. Consideration is given to the following: · 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. In determining whether food is marketed as confectionery or as an ingredient for confectionery, it is also relevant to look at the uses to which the product is put. For the purposes of this ruling the food products will be divided into those with one main ingredient and those with more than one. | Detailed Reasoning - One main ingredient: The Detailed food list (a public ruling for GST purposes) provides that a certain product (Product A) is GST-free. Although the food products have ingredients added in minute quantities, we consider the food products with one main ingredient can still be treated as Product A as the character of the product has not changed as a result of adding the extra ingredients. The products also have no added sugar. Looking at the product as a whole, the ingredient used in these products and following the guidance provided by Issue 12, these products cannot be considered as being confectionery. Consequently, these products would be GST-free under section 38-2 of the GST Act. | Detailed Reasoning - More than one main ingredient: With the addition of other main ingredients the food products are no longer similar to Product A. Following the guidance of the Court decision given in Issue 12 ( Landau and Anor. v Goldwater and Anor ), we consider these products now to be more akin to confectionery products. Consequently, these products would be taxable under section 9-5 of the GST Act. | Detailed Reasoning - Taxable and non taxable importations: You are to import into Australia the food products. 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 ). Section 13-10 of the GST Act further provides that an importation is non-taxable if: · it is a non-taxable importation under Part 3-2 of the GST Act, or · it would have been a supply that was GST-free or input taxed if it had been a supply (for example, it would be a GST-free supply had the supply been made in Australia). In your case, your supply in Australia of the products with one main ingredient is GST-free and therefore a non-taxable importation under section 13-10 of the GST Act. The remaining products will be a taxable importation under section 13-5 of the GST Act.

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.