Private ruling: GST and food
Date of advice: 2 September 2021
Published: November 2021

Ruling: Q2: Is the supply of the listed products (the Products) GST-free pursuant to section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes. | Q3: Is the importation of the listed Products a non-taxable importation under paragraph 13-10(b) of the GST Act? | A2: Yes.

Relevant facts and circumstances: You import and sell various herbs. You are registered for GST. You do not market the products as either food or medicinal purposes. You sell to retail stores such as herbalists, Asian groceries, gift shops and to individuals. The retailer knows the purpose of the product very well and you do not need to do any promotion When you sell the products, you do not emphasize the therapeutic benefits of the products but emphasize on the quality and price compared with other suppliers. Some of the products are eaten on their own and some are used as ingredient for dishes or used for stew soup. Some are used to make tea as they are traditionally good for the human body but there is no fixed formula or dosage. Manufacturing process: • Pick out foreign objects and debris • Cleaning with water • Sun-dried or heat-dried • Packed in aluminum foil bag, paper bag or jar You provided product information on a selection of raw herbs. Some of the raw herbs are eaten on their own or used in making various dishes. Other raw herbs are consumed by being added to soup.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 13-5. | A New Tax System (Goods and Services Tax) Act 1999 paragraph 13-10(b). | 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 paragraph 38-3(1)(c). | A New Tax System (Goods and Services Tax) Act 1999 section 38-4. | A New Tax System (Goods and Services Tax) Act 1999 paragraph 38-4(1)(a). | A New Tax System (Goods and Services Tax) Act 1999 paragraph 38-4(1)(b). | A New Tax System (Goods and Services Tax) Act 1999 Schedule 1 clause 1.

Reasons for decision: Summary: In this reasoning, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). | Detailed Reasoning - Question 1: The supply of the listed products (the Products) is GST-free under section 38-2 of the GST Act because: • the Products satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act as food for human consumption (whether or not requiring processing or treatment), and • the supply of the Products does not fall within any other exclusions in section 38-3 of the GST Act. | Detailed Reasoning - Question 2: The importation of the Products is a non-taxable importation under paragraph 13-10(b) of the GST Act because, as outlined in Question 1, had it been a supply, it would have been GST-free. | Detailed Reasoning - Question 1: You supply a range of raw herbs, which are herbs that have not been processed in a factory but have been dried. They consist of barks, roots, flowers, seeds and fruits. The supply of raw herbs will be GST-free as food where the requirements of section 38-2 are satisfied. Where raw herbs do not satisfy the requirements of section 38-2, they will not generally be GST-free. Under section 38-2 a supply of food is GST-free if the product satisfies the definition of food in section 38-4 and the supply is not excluded from being GST-free by section 38-3. Food is defined in subsection 38-4(1) to include: • food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a)) and • ingredients for food for human consumption (paragraph (38-4(1)(b)). However, under paragraph 38-3(1)(c), a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). 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 23 August 2021, defines 'food' as: 1. what is eaten, or taken into the body, for nourishment. The courts, in determining whether a particular good is food, will look to what an ordinary person understands food to be. It is considered that a good will generally be food where it has the normal characteristics of food in that it looks like food, tastes like food and fills the stomach like food. Goods such as bark, twigs, roots, flowers and seeds, do not have the normal characteristics of food and will not be food and would not generally be considered to be ingredients of food. Some of the raw herbs are eaten on their own or used in making various dishes. We consider these products to be food for human consumption under paragraph 38-4(1)(a). Other raw herbs are consumed by being added to soup. We do not consider them to be ingredients for that soup. The soup to which these products are added exists independently of the products. The soup is simply a means by which the products are ingested. We consider these products to be food for human consumption under paragraph 38-4(1)(a). The Products are not food of a kind listed in Schedule 1. Furthermore, the supply of the Products does not fall within any of the other exclusions in section 38-3. Therefore, the supply of the Products is GST-free under section 38-2 of the GST Act. | Detailed Reasoning - Question 2: GST is payable on all taxable importation of goods into Australia. Section 13-5 of the GST Act provides that an entity makes a taxable importation if: • goods are imported and • the entity enters the goods for home consumption within the meaning of the Customs Act 1901 . However, an importation is not a taxable importation to the extent that it is a non-taxable importation. Paragraph 13-10(b) of the GST Act provides that an importation is a non-taxable importation to the extent that, had it been a supply, the supply would have been a GST-free or input taxed supply. As such, an importation of herbs is a non-taxable importation only if it would have been GST-free if supplied in Australia. As discussed in Question 1 above, the supply of the Products is GST-free under section 38-2 of the GST Act. Therefore, the importation of the Products is a non-taxable importation under paragraph 13-10(b) of the GST Act.