Private ruling: GST and food products
Published: November 2012

Ruling: Q1: Is your supply of the food products GST-free? | A1: No. Your supply of these products is taxable.

Relevant facts and circumstances: You are registered for goods and services tax (GST). You import and then supply in Australia two food products. You have supplied a sample of the packaging for both products. The packaging suggests that the products be used to make beverages. The manufacturer's various websites provide suggested uses, principally as ingredients to make beverages. The internet shows that similar products are primarily used as an ingredient for beverages.

Relevant legislative provisions: All references are to the A New Tax System (Goods and Services Tax) Act 1999 Section 7-1 | Section 13-5 | Paragraph 13-10 | Section 38-2 | Section 38-3 | Section 38-4.

Reasons for decision: Summary: Section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that a supply of food is GST-free provided the food does not come within any of the exclusions listed in section 38-3 of the GST Act. Subsection 38-4(1) of the GST Act defines food for the purposes of section 38-2 of the GST Act and of the foods defined in this provision, the only relevant ones to your food products are: · ingredients for food for human consumption (paragraph 38-4(1)(b)), and · ingredients for beverages for human consumption (paragraph 38-4(1)(d)). In relation to beverages and ingredients for beverages, paragraph 38-3(1)(d) of the GST Act ensures that a supply of a beverage or an ingredient for a beverage is taxable unless it is a beverage or an ingredient for a beverage of a kind specified in the third column of the table in clause 1 of Schedule 2 (Schedule 2). Apart from this, the two food products do not fall within any of the other exclusions listed in section 38-3 of the GST Act. A copy of Schedule 2 is available from the Australian Taxation Office (ATO) website www.ato.gov.au. An examination of Schedule 2 shows that neither of the two products is specifically listed in the Schedule and also cannot be considered as being a product that is of a kind to any of the beverages or ingredients listed. Ingredients for beverages A consumer can, of course, consume any product in the manner of their choosing (products labelled as an ingredient to be mixed with food can be used to make a beverage and visa versa). Therefore in determining what a product is, it is relevant to use the 'essential character' test adopted under the former wholesale sales tax regime. The ATO adopts the view that the essential character of goods assists in determining their GST classification. This involves ascertaining what the goods essentially are, as distinct from merely identifying one of a number of characteristics the goods might have. This approach relies upon deciding what is 'the basic nature of the goods' and involves consideration of what the goods are made of and what they might be used for. In this case, the products are marketed through their packaging and various websites principally as ingredients for beverages. Consequently, the relevant legislative provision of the GST Act to consider is paragraph 38-4(1)(d). Hence, although the products are food under section 38-2 of the GST Act, they are excluded from being GST-free under paragraph 38-3(1)(d) of the GST Act. Consequently, your supply of these products is taxable. Taxable importation Section 7-1 of the GST Act) provides that GST is payable on a taxable importation. Section 13-5 of the GST Act provides that you make a taxable importation if goods are imported and the goods are entered for home consumption. However, section 13-10 of the GST Act provides that an importation is a non-taxable importation 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 of the two products in Australia is taxable and consequently, the second dot point above cannot be applied to your importation of these products. In the case of the first dot point, it would be necessary for you to contact Australian Customs given Part 3-2 of the GST Act refers to the Customs Tariff Act 1995 , this Act being the responsibility of Australian Customs.

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