GST and Fruit and Nut Mix

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 fruit and nut mix?

Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells fruit and nut mix.

The entity is a food supplier that sells fruit and nut mix.

The nuts used in the mix are raw almond kernels, raw cashew kernels, raw brazil nuts and raw hazelnuts. The nuts are shelled and the skin removed by blanching. The nuts have not been processed or treated by salting, spicing, smoking or roasting.

The fruit used in the mix consists of raisins and dried tree fruits with no added sugar or further processing.

The fruit and nut mix is not sold for consumption on the premises from which it is supplied.

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

Generally, a supply of food is GST-free under section 38-2 of the GST Act provided that the supply does not come within any of the exclusions listed in section 38-3 of the GST Act. Food is defined in paragraph 38-4(a) of the GST Act to include food for human consumption (whether or not requiring processing or treatment). Fruit and nut mix is considered to be 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), or food that is a combination of one or more foods specified in Schedule 1. In this case, item 12 and item 16 in the table in Schedule 1 are most relevant.

Item 12 of Schedule 1 (Item 12) lists crystallised fruit, glace fruit and drained fruit. The dried fruit in the fruit and nut mix is not a fruit product described in Item 12 and is therefore not covered by that item.

Item 16 of Schedule 1 (Item 16) lists seeds or nuts that have been processed or treated by salting, spicing, smoking or roasting, or 'in any other similar way'. In this case, the nuts in the fruit and nut mix are raw and have not been processed or treated by salting, spicing, smoking or roasting. Therefore, it is necessary to consider whether shelling the nuts and removing their skin by blanching is a process or treatment that is similar to salting, spicing, smoking or roasting.

Where there is a list of two or more specific words, the class rule ( ejusdem generis rule ) of interpretation may be applied to restrict the meaning of the general words to the same class of the specific words that precede them ( Attorney General v. Brown [1920] 1 KB 773).

As such, the otherwise wide meaning of the words 'in any other similar way' is restricted to the same class of the words salting, spicing, smoking and roasting. It is considered that these specific words are all descriptions of types of flavour enhancing processes. In this case, although the nuts are raw, some are shelled and blanched to have their skins removed. This shelling and blanching process does not add to or enhance the flavour of the nuts. Consequently, the nuts are considered not to be treated in a similar way to salting, spicing, smoking or roasting. Therefore, the nuts in the nut mix do not fall under Item 16.

Accordingly, as the foods used in the fruit and nut mix are not specified in Schedule 1, paragraph 38-3(1)(c) of the GST Act does not exclude the supply of this fruit and nut mix from being GST-free. In addition, the supply of the fruit and nut mix 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 under section 38-2 of the GST Act when it sells the fruit and nut mix.