Private ruling: GST and snack foods
Date of advice: 7 September 2015
Published: September 2015

Ruling: Q1: Is a supply of the product a GST-free supply pursuant to section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes.

Relevant facts and circumstances: The product is sourced overseas and will be distributed in Australia. The product is marketed as a food snack. It currently comes in various flavours: The product contains 100% of the specified foods with some minor additives for bonding. X is present in all of the flavoured products. The main raw materials for X production are dried citrus peel or apple pomace, both by­ products of juice production. Images of the packaging used for the product (as sold in another English speaking country) are found on a website.

Relevant legislative provisions: 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 section 38-4

Reasons for decision: Summary: The supply of the product is a GST-free supply pursuant to section 38-2 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. Section 38-4 of the GST Act provides the meaning of the word 'food' and it includes, amongst other things, food for human consumption. The product satisfies the definition of food under section 38-4 of the GST Act as it is food for human consumption. However, subsection 38-3(1) of the GST Act specifies some foods that are excluded from being GST-free. The subsection states: A supply is not GST-free under section 38-2 if it is a supply of: (a) *food for consumption on the *premises from which it is supplied; or (b) hot food for consumption away from those premises; or (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; or (d) a *beverage (or an ingredient for a beverage), other than a beverage (or ingredient) of a kind specified in the third column of the table in clause 1 of Schedule 2; or (e) food of a kind specified in regulations made for the purposes of this subsection. * denotes a defined term in the GST Act Based on the information provided, we consider that paragraph 38-3(1)(c ) of the GST Act may be applicable to the product. The product is retailed as snack foods. 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 specified in the third column of the table in clause 1 of Schedule 1 to the GST Act (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 relevant item in Schedule 1 which may apply to the product is item 8 of Schedule 1 (Item 8). Item 8 lists confectionery, food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery. This is explained in paragraph 1.45 of the Further Supplementary Explanatory Memorandum to the GST Bill, which states: "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." There are a number of court cases which can assist in determining whether a product is confectionery. For example 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." Therefore, a confectionery is generally food that is sweet in character and nature of delicacy. It generally contains substantial amounts of sugar. Issue 12 of the GST Food Industry Partnership Issues Register (Issue 12) provides further guidance in determining whether a product is a confectionery. It states that the activities of the seller are relevant in determining whether a food is marketed as a "confectionery" or "ingredients for confectionery" under item 8. Issue 12 lists the following considerations: • 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. The product has relatively high sugar content; however this is not added in manufacture. The ingredients for the product are specific foods and a gelling agent. The packaging also claims that the product is 100% food specific. The packaging promotes the product as a snack product. It advertises the product as '100% '. The product is made almost entirely from specific food products with the balance consisting of gelling agent and in some cases an anticaking agent. Based on the above information, we consider that the product is not confectionery foods listed under item 8. Although the products contain some naturally occurring sugar, it has been promoted as a food snack. Note that a product of similar constituency is listed in the Detailed Food List as GST-free as it is food for human consumption that is not of a kind specified in Schedule 1 of the GST Act. As the product is not food of a kind listed in Schedule 1, it isn't excluded from being GST-free by subsection 38-3 of the GST Act. The supply of the product is GST-free under section 38-2 of the GST Act.