GST and Noni Fruit Capsules

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 noni fruit capsules?

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

The entity is a food supplier. In this case, the entity is selling noni fruit capsules.

The capsules contain 100% sun dried noni fruit (morinda citrifolia).

Section 38-50 of the GST Act does not apply to make a supply of noni fruit capsules GST-free.

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.

Division 38 sets out the supplies that are GST-free. Under section 38-2 of the GST Act a supply of 'food' is GST-free. Subsection 38-4(1) of the GST Act sets out what amounts to 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 which provides that food includes 'food for human consumption (whether or not requiring processing or treatment)'.

As such, the issue at hand is whether the noni fruit capsules are considered to be 'food for human consumption' under paragraph 38-4(1)(a) of the GST Act.

The phrase 'food for human consumption' is not defined for the purposes of paragraph 38-4(1)(a) of the GST Act. As such, the ordinary meaning of the words in the phrase must be examined.

'Food' is defined in The Macquarie Dictionary (1997) as 'what is eaten, or taken into the body, for nourishment'. However, currently there is no Australian case law that discusses the meaning of the word 'food'. Nevertheless, further guidance as to the meaning of the word 'food' can be gained from similar cases decided in overseas jurisdictions.

In Grosvenor Commodities (LON/90/1805X) No 7221, the Chairman stated that '....capsules do not satisfy hunger...they do look like food, taste like food or fill the stomach like food. In my mind the capsules are clearly not food.'

Therefore, it is considered that products sold in capsule form do not look like, taste like or fill the stomach like food. As a result, products sold in capsule form are not considered to be 'food for human consumption' for the purposes of paragraph 38-4(1)(a) of the GST Act.

The product in question is sold in capsule form. As such, the noni fruit capsules are not considered to be food for the purposes of paragraph 38-4(1)(a) of the GST Act. Therefore, as the noni fruit capsules do not amount to food under subsection 38-4(1) of the GST Act, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells the noni fruit capsules.

The entity is registered for GST and the supply meets 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 the noni fruit capsules.