Private ruling: GST and food
Date of advice: 15 December 2016
Published: May 2017

Ruling: Q1: Is the supply of Product 1 a taxable supply? | A1: No | Q2: Is the supply of Product 2 a taxable supply? | A2: No | Q3: Is the supply of Product 3 a taxable supply? | A3: Yes | Q4: Is the supply of Product 4 a taxable supply? | A4: Yes | Q5: Is the supply of Product 5 a taxable supply? | A5: Yes | Q6: Is the supply Product 6 a taxable supply? | A6: Yes | Q7: Is the supply of Product 7 a taxable supply? | A7: Yes | Q8: Is the supply of Product 8 a taxable supply? | A8: Yes

Relevant facts and circumstances: Your are registered for GST. You make your products yourself, by hand. Product 1 The product is made from dried seasoned mushrooms. Product 2 Product 2 is a thin wrap made from fruits and vegetables Product 3 Product 3 is a mixture of fruit and nuts that have been dried out. You market Product 3 as a pancake You instruct your customers to use Product 3 in a similar way to a pancake Product 4 Product 4 is made from seeds and vegetables mixed up and spread, then dried out Product 4 has a mild flavour. Product 4 is thin (approximately 8mm). Product 4 is brittle and “cracks” when pressure is applied. Product 5 Product 5 is made from seeds and fruit mixed up and spread then dried. Product 5 is thin (approximately 3mm). Product 5 is brittle and “cracks” when pressure is applied. Product 6 Product 6 is made from seeds, fruit and vegetables mixed up and spread then dried out to be used as a bread alternative. Product 6 is thin (approximately 4mm). Product 6 is brittle and “cracks” when pressure is applied. Product 7 and Product 8 Both Product 7 and Product 8 are made of seeds and fruit mixed up and spread then dried. Both are approximately 20mm thick. Both products have a soft texture.

Relevant legislative provisions: Section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 | Section 38-4 of the A New Tax System (Goods and Services Tax) Act 1999 | Section 38-3 of the A New Tax System (Goods and Services Tax) Act 1999 | Schedule 1 to the A New Tax System (Goods and Services Tax) Act 1999 | Subsection 15AB(1) of the Acts Interpretation Act 1901 | Paragraph 15AB(2)(e) of the Acts Interpretation Act 1901

Reasons for decision: Summary: A supply of food will be 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 the supply is not excluded from being GST-free 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) of the GST Act. Your products satisfy this definition of food as they are supplied as food for human consumption. However, under paragraph 38-3(1)(c) of the GST Act a supply of food is not GST-free if it is food of a kind that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). It should also be noted that in Lansell House Pty Ltd and Anor v FC of T [2011] FCAFC 6 (Lansell) at [30] has extended the meaning of the phrase “of a kind" in s 38-3(1)(c) of the GST Act as follows: 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. Product 4, product 5 and Product 6 (the Crackers) You contend that the Crackers are not products which are specifically listed of Schedule 1 and are more akin to a bread which is not listed in Schedule 1. Of those items listed, Item 32 is the most relevant. Of the products listed in Item 32, crackers are the relevant type of biscuit that needs to be taken into account when determining whether your products are a food of a kind of those specifically listed. In deciding whether your products fall under Item 32 of Schedule 1, it is relevant to consider the reasoning and analysis provided in the full Federal Court case Lansell. In Lansell, it was necessary to determine if a product labelled as a type of bread also had the characteristics of a cracker biscuit and therefore could be classified as such. In reaching this decision, Lansell recognised that a food product may have characteristics to allow it to be classified into more than one food category (in our case either savoury snacks or an item not identified in Schedule 1). However, Lansell further provides that for GST purposes a food product can only have one classification and this classification should be based on the product's characteristics. The Crackers display a crisp texture and “crack” when pressure is applied, are thin, unleavened, are lightly flavoured and have a texture similar to that of a cracker. Based on the description above and the guidance provided by Lansell we consider the Crackers also have the character of a cracker. Hence your products are captured by Item 32 and therefore, their supply would be taxable under paragraph 38-3(1)(c) of the GST Act. Product 3 Item 20 of Schedule 1 provides that both crepes and pancakes should be subject to GST. In Lees of Scotland Ltd and Anor v Revenue and Customs [2014] UKFTT 630 (TC) (Lees') it was necessary to determine whether a snowball was a cake. In reaching this decision, Lees' recognised the following principles: ● Modern cooking techniques would not necessarily differentiate a product from one cooked using traditional techniques. ● Not all characteristics of a categorisation need to be met, only sufficient characteristics need to exist ● Whether an item does not look out of place when placed with other items in the categorisation Your product falls within item 20 as a pancake. Your website, packaging and naming market Product 3 as a pancake. Although your product is not cooked in the same way as a conventional pancake, your serving suggestion recommends enjoying the pancakes with fruits, nut creams, raw syrups and raw ice cream. This is very similar to the way that a pancake is usually served. Based on the above facts and the guidance provided by Lansell and Lees' we consider the Product 3 have the character of a pancake and are therefore captured by Item 20 of Schedule 1 and therefore, its supply would be taxable under paragraph 38-3(1)(c) of the GST Act. In the alternative, your product falls within item 32 as a biscuit, cookie or cracker. While you have described your product as a pancake, a label will not necessarily govern the classification of the product. As explained in Lansell, the overall impression created by the product needs to be considered. Your product is made of Bananas, Brazil nuts, Goji Berries and flaxmeal. It is round in shape and can be eaten with one hand in a similar fashion to a biscuit. One shares a physical similarity to that of a biscuit. Based on the above facts and the guidance provided by Lansell we consider the Product 3 has the character of a biscuit. Hence your product is also captured by Item 32 of Schedule 1 and therefore, its supply would be taxable under paragraph 38-3(1)(c) of the GST Act. Product 7 and Product 8 (the Biscuits) Item 32 concerns food that consists principally of biscuits, cookies, crackers, pretzels, cones or wafers. The terms "biscuits, cookies, crackers, pretzels, cones or wafers" are not defined in the GST Act and will bear their ordinary meanings. You contend that the Biscuits differ significantly from traditional biscuits. As previously explained, as outlined in Lansell, it is necessary to consider the characteristics of the products and the overall impression they create. The Biscuits have a firm texture and their shape resembles that of a biscuit. Furthermore, you market them as biscuits on your website and your packaging. Based on the above facts and the guidance provided by Lansell and Lees' we consider the biscuits to be of a kind of biscuits under item 32 of Schedule 1, and therefore, their supply would be taxable under paragraph 38-3(1)(c) of the GST Act. Product 2 Product 2 have a low sugar content, a soft texture and are not of a kind listed in Schedule 1. Accordingly, the supply of the Product 2 is not excluded from being GST-free by any provision contained in section 38-3 of the GST Act. Therefore, the supply of the Product 2 is a GST-free supply of food under section 38-2 of the GST Act. Product 1 The Goods and Services Tax Industry Issues Detailed Food List provides that mushrooms (dried, fresh, frozen, marinated, stuffed, and tinned) are considered to be GST-free. Product 1 consists of mushrooms which have been dehydrated. Sesame seeds, Tamari sauce, Coriander and Brags seasoning are then added to the mushrooms for flavour. The product also shares a physical resemblance with that of a dried mushroom. The addition of Sesame seeds, Tamari sauce, Coriander and Brags seasoning does not alter the overall character and dried mushrooms. Therefore the product still retains the overall impression of that of a dried mushroom. We therefore consider that the Product 1 meets the definition of a dried mushroom and is therefore considered GST-free.