Private ruling: GST and the supply of a contract to supply a food product
Published: May 2015
Ruling period: 1 July 2014 to 30 June 2015.
Date scheme commenced: 12 December 2014.

Ruling: Q1: Are the proceeds received from the sale of a contract to supply a food product, subject to GST? | A1: No.

Relevant facts and circumstances: • You are registered for goods and services tax (GST). • You have an agreement to supply a food product to the recipient. • You entered into a contract to assign your supply of the food product after a certain time. • The assignment of the food product was approved by the recipient. • You received a deposit on signing the contract and the balance at a later date. • The supply of the food product was removed from your agreement with the recipient. • The supply of the food product was added to the agreement between the buyer and the recipient.

Relevant legislative provisions: All references are to the A New Tax System (Goods and Services Tax) Act 1999 : Section 38-2 | Section 38-3 | Section 38-4 | Section 9-5 | Section 9-30

Reasons for decision: Summary: The assignment of your supply of the food product is not subject to GST. | Detailed Reasoning - Detailed reasoning: Section 9-30 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that: (1) A supply is GST-free if: (a) it is GST-free under Division 38 or under a provision of another Act; or (b) it is a supply of a right to receive a supply that would be GST-free under paragraph (a). Division 38 of the GST Act deals with GST-free supplies. Of relevance to this case is section 38-2 of the GST Act. Under section 38-2 of the GST Act, a supply of food is GST-free 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. The definition of food in section 38-4 of the GST Act includes food for human consumption, whether or not requiring processing or treatment. The products you sell are food for human consumption. Some examples on the application of section 9-30 of the GST Act are provided in Goods and Services Tax Ruling GSTR 2000/25. GSTR 2000/25 provides guidance on GST-free supplies of water, sewerage and sewerage-like services, storm water draining services and emptying of a septic tank. Paragraphs 25 and 26, deal with the application of paragraph 9-30(1) (b) of the GST Act to the supply of water rights . Paragraphs 25 and 26 of GSTR 2000/25, deal with the supply of a right to receive a GST-free supply of water, discuss trading water rights that may be exercised for a specified period or for a specified quantity of water. The water right is for a tangible and quantifiable amount of water. Your contract is a right to supply a quantifiable amount of a food product. As the supply of the food product is GST-free under section 38-2 of the GST Act, the supply of a right to supply a quantifiable amount of the food product is also GST-free. Accordingly, the supply of your contract to supply the food product is GST-free under paragraph 9-30(1)(b) of the GST Act.