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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 sells halva?

No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells halva. The entity is making a taxable supply under section 9-5 of the GST Act.

The entity is a food supplier. The entity supplies halva. Halva is a product made from the extract of crushed sesame seeds. The product is sweetened and either vanilla, chocolate, or peanut flavour is added. The product contains sugar.

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.

Under section 38-2 of the GST Act a supply of 'food' is GST-free provided that it does not come within any of the exclusions listed in section 38-3 of the GST Act.

Food is defined in paragraph 38-4(1)(a) of the GST Act to include food for human consumption (whether or not requiring processing or treatment). Halva is considered to be food for human consumption.

However, under paragraph 38-3(1)(c) of the GST Act, a supply of food will not be GST-free if it is food of a kind that is specified in clause 1 of Schedule 1 to the GST Act (Schedule 1).

Halva is not specifically listed in Schedule 1. The item listed in Schedule 1 that is of relevance in this case is item 8 of Schedule 1. Item 8 of Schedule 1 lists, 'confectionery, food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery'.

The issue, therefore, is whether halva falls within the scope of item 8 of Schedule 1.

The term 'confectionery' is not defined in the GST Act and therefore must be given its ordinary meaning. 'Confectionery' is defined in The Macquarie Dictionary (1997) as 'confections or sweets collectively'.

Furthermore, Aickin J in the High Court decision Landau and Anor v. Goldwater and Anor (1976) 13 ALR 192 gave the following general description 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.'

In this case, halva is of a sweet character, contains sugar and is in the nature of a delicacy. In addition, 'halva' is defined in The Macquarie Dictionary (1997) as 'a sweet confection of Middle Eastern origin, containing honey and sesame seeds'.

Accordingly, halva is considered to be confectionery and falls within the scope of item 8 of Schedule 1. As such, the entity is not making a GST-free supply under section 38-2 of the GST Act.

The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells halva.