GST and Yoghurt Starter Powder

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 yoghurt starter powder?

Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells yoghurt starter powder.

The entity is a food supplier. The entity is selling yoghurt starter powder.

The product is used as a starting material for the manufacture of yoghurt. It can also be consumed directly.

The entity is registered for goods and services tax (GST).

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.

Subsection 38-4(1) of the GST Act defines food for the purposes of section 38-2 of the GST Act. Of most relevance to this case is paragraph 38-4(1)(a) of the GST Act and paragraph 38-4(1)(b) of the GST Act.

Paragraph 38-4(1)(a) of the GST Act provides that food includes food for human consumption (whether or not requiring further processing or treatment). Paragraph 38-4(1)(b) of the GST Act provides that food includes ingredients for food for human consumption. Yoghurt starter powder can be used either as an ingredient for making yoghurt or consumed as food on its own. Therefore, the yoghurt starter powder satisfies the definition of food contained in paragraph 38-4(1)(a) of the GST Act and paragraph 38-4(1)(b) 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 that is specified in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 29 in the table in Schedule 1 provides that frozen yoghurt is not GST-free.

Yoghurt starter powder does not fall within item 29 in the table in Schedule 1, as it is not frozen yoghurt.

In addition, the supply of the yoghurt starter powder does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply of yoghurt starter powder under section 38-2 of the GST Act.