ATO Interpretative Decision
ATO ID 2001/500 (Withdrawn)
Goods and Services Tax
GST and processed fruit strips
FOI status: may be released
Status of this decision: Decision Withdrawn 23 September 2005
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it supplies processed fruit strips?
Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies processed fruit strips.
The entity is a food supplier. The entity is supplying processed fruit strips.
The fruit strip is made from more than 99% dehydrated fruit paste and a very small amount of natural colour and flavour. The fruit strip contains no added sugar.
The entity is registered for goods and services tax (GST).
Reasons for Decision
A supply of food is GST-free under section 38-2 of the GST Act provided that it does not come within any of the exclusions listed in section 38-3 of the GST Act.
Section 38-4 of the GST Act provides the meaning of food. Under paragraph 38-4(1)(a) of the GST Act food includes 'food for human consumption'. The processed fruit strips are 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). Item 11 of Schedule 1 (item 11) lists food known as muesli bars or health food bars and similar foodstuffs.
The term 'muesli bar' is not defined in the GST Act and therefore takes its ordinary dictionary meaning. The Macquarie Dictionary (1997) defines a muesli bar as 'a commercially prepared and packaged snack made from a muesli mixture, usually sweetened and set in a bar shape'.
The processed fruit strips are not made from a muesli mixture and are not set in a bar shape. The processed fruit strips are not muesli bars.
The term 'health food bar' is not defined in the GST Act. Furthermore, the term is not defined in The Macquarie Dictionary (1997) and there is no generally accepted description of what constitutes a 'health food bar'. Accordingly, the meaning of this term is ambiguous. Where the meaning of a provision is ambiguous, it is permissible to refer to the explanatory memorandum to the relevant Act in determining the meaning of the provision (subparagraph 15AB(1)(b)(i) and paragraph 15AB(2)(e) of the Acts Interpretation Act 1901 ).
Paragraph 1.3 of the Further Supplementary Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998 states: 'The amendments will ensure that basic food for human consumption is GST-free. In addition, they will ensure that the current WST exemptions for food are, in general, maintained.'
Under the Wholesale Sales Tax (WST) system, the following guidelines were developed to indicate the characteristics of muesli bars and health food bars. These characteristics are:
- Muesli bars and health food bars have less than 55% real fruit content.
- Muesli bars and health food bars contain significantly more than 10% added sugars in any form.
- Muesli bars and health food bars have greater than 2% added fat.
- Muesli bars and health food bars are multi component products combining products such as fruits, nuts, cereals, sugars, milk etc.
The processed fruit strips have 99% fruit and contain no added sugar. They are low in fat and are not multi-component products combining ingredients such as fruits, nuts, cereals, sugar, milk etc.
Accordingly, the processed fruit strips are not health food bars. Based on the characteristics of muesli bars and health food bars established under the WST system, nor are they a similar foodstuff to health food bars or muesli bars. Therefore, the processed fruit strips are not covered by item 11.
As such, the supply of the processed fruit strips is not excluded from being GST-free under paragraph 38-3(1)(c) of the GST Act. Furthermore, none of the other exclusions in section 38-3 of the GST Act prevent the supply from being GST-free. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies the processed fruit strips.
Date of decision: 7 September 2001
A New Tax System (Goods and Services Tax) Act 1999
Schedule 1 clause 1
Schedule 1 clause 1 table item 11
Acts Interpretation Act 1901
Herbert Adams Pty Ltd v. FCT
(1932) 47 CLR 222
Related ATO Interpretative Decisions
ATO ID 2001/501
The Macquarie Dictionary, (1997), 3rd edn, The Macquarie Library Pty Ltd, New South Wales
Further Supplementary Explanatory Memorandum to the A New Tax System (Goods and Services Bill) Act 1998 paragraph 1.3
Goods & services tax
Food for human consumption
Date of publication: 22 October 2001
|ATO ID 2001/500 (Withdrawn) history