ATO Interpretative Decision
ATO ID 2010/145
Goods and Services Tax
GST and dip with biscuits
FOI status: may be released
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Is the entity, a food supplier, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies dip with biscuits where the dip and biscuits are wrapped individually and then packaged together?
No, the entity is not making a taxable supply under section 9-5 of the GST Act when it supplies dip with biscuits where the dip and biscuits are wrapped individually and then packaged together. The entity is making a mixed supply that is partly taxable under section 9-5 of the GST Act and partly GST-free under section 38-2 of the GST Act.
The entity is a food supplier. The entity supplies dip with biscuits.
The dip is contained in a plastic tub and the biscuits are wrapped in plastic. The tub of dip and packet of biscuits are then wrapped together by additional outer packaging.
The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.
Reasons for Decision
Section 9-5 of the GST Act provides that an entity makes a taxable supply when the requirements in that section are met. However, a supply is not a taxable supply to the extent that it is GST-free or input taxed.
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.
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). Both the dip and the biscuits are food for human consumption, and therefore, satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act.
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 specified in 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 specified in Schedule 1.
Dip is not food of a kind specified in Schedule 1 and is, therefore, GST-free. However, biscuits are specified in item 32 of Schedule 1 (Item 32). Item 32 specifies food 'that is, or consists principally of, biscuits, cookies, crackers, pretzels, cones or wafers' are not GST-free.
Therefore, it is necessary to determine whether the supply of the dip together with the biscuits is a supply of 'food that is a combination of one or more foods at least one of which is a food of such a kind' specified in Schedule 1.
The Macquarie Dictionary (1997) defines 'combination' to mean '1. the act of combining. 2. the state of being combined. 3. a number of things combined.' 'Combine' is defined in The Macquarie Dictionary (1997) to include 'to bring or join into a close union or whole; unite; associate; coalesce.' Therefore, food that is a 'combination of one or more foods' could be either a number of food items joined or mixed together to make a single product or a number of food products that are merely sold together. As the word 'combine' could be interpreted in more than one way, the meaning of the phrase 'food that is a combination of one or more foods' in paragraph 38-3(1)(c) of the GST Act is unclear.
Subsection 15AB(1) of the Acts Interpretation Act 1901 provides that consideration may be given to material not forming part of an Act for particular purposes including 'to determine the meaning of the provision when the provision is ambiguous or obscure....'. Paragraph 15AB(2)(e) of the Acts Interpretation Act provides that any explanatory memorandum relating to the Bill containing the provision is extrinsic material that may be considered for this purpose.
Paragraph 1.17 of the Further Supplementary Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998 (EM) states:
Food that is a combination of one or more foods, at least one of which is food of a kind specified in the table in new Schedule 1A of the Bill (prepared food, confectionery, savoury snacks, bakery products, ice-cream food and biscuit goods) is not GST-free. For example, a snack pack containing cheese and biscuits is not GST-free because it contains at least one type of food specified in new Schedule 1A (biscuits)...
Paragraph 1.18 of the EM clarifies the intended scope of this provision by stating:
The exclusion in the above paragraph would not apply where a mix of packaged goods is packed and sold together (eg. a hamper containing a packet of biscuits, box of chocolate and a jar of coffee). These items would be taxed individually (ie. Biscuits and chocolates subject to tax and the coffee GST-free).
Therefore, a supply combining individual foods that are taxable (that is, listed in Schedule 1) and GST-free, but which are supplied in a single tray and are not separated by their individual packaging (for example a snack pack containing cheese and biscuits) is excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act, because it is 'a combination of food that contains a type of food specified in Schedule 1'.
This can be contrasted with a supply of individual foods that are taxable (that is, listed in Schedule 1) and GST-free, but which are packaged individually and then wrapped and sold together (for example a hamper). This type of supply is not 'a combination of food that contains a type of food specified in Schedule 1' because, as each food is individually packaged, they are not 'combined'. This is a mixed supply, with the GST status of each item being assessed independently.
The entity is supplying dip and biscuits which are individually packed and then wrapped together by additional outer packaging, similar to a hamper. Therefore, the supply is not 'a combination of one or more foods at least one of which is food of such a kind (specified in schedule 1)' and is not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.
The supply of biscuits satisfies all the positive limbs of section 9-5 of the GST Act and is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity's supply of the biscuits is taxable under section 9-5 of the GST Act.
Since the dip is GST-free, the entity is making a mixed supply and will need to apportion the consideration.
Note 1 : section 9-40 of the GST Act provides that the entity is liable for GST on the taxable supplies that it makes. Generally, an entity's GST liability is calculated as 1/11 of the consideration for the supply. Where the supply is a mixed supply, the GST liability is only calculated on the taxable portion as determined in subsection 9-80(2) of the GST Act.
Subsection 9-80(2) of the GST Act provides that the value of the mixed supply that represents the taxable supply is calculated in accordance with the following formula:
(Price of the supply * 10) / (10 + Taxable proportion)
where: 'taxable proportion' is the proportion of the value of the actual supply that represents the value of the taxable supply (expressed as a number between 0 and 1).
Note 2 : where an entity makes a mixed supply, the tax invoice must satisfy the requirements of subsection 29-70(1) of the GST Act, including that it contain enough information to clearly ascertain:
- what is supplied, including the quantity and price;
- the extent to the supply is a taxable supply; and
- the amount of GST payable.
Date of decision: 1 July 2010
A New Tax System (Goods and Services Tax) Act 1999
Schedule 1 clause 1
Schedule 1 clause 1 table item 32
Acts Interpretation Act 1901
ATO Interpretative Decisions overturned by this decision
ATO ID 2002/684
Further Supplementary Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998.
The Macquarie Dictionary, 1997, 3rd edition, The Macquarie Library Pty Ltd, New South Wales.
Goods and services tax
Food for human consumption
Date of publication: 13 August 2010