GST and food hampers

Is the entity, a food supplier, making a mixed supply that must be valued under section 9-80 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a food hamper which consists of food items that are both taxable and GST-free?

Yes, the entity is making a mixed supply that must be valued under section 9-80 of the GST Act when it supplies a food hamper which consists of food items that are both taxable and GST-free.

The entity is a food supplier. The entity sells a hamper that consists of a variety of food items. Some of the food items are specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). The hamper does not include any beverages.

The food items are not supplied for consumption on the premises from which they are supplied. The entity does not supply the food items as hot food for consumption away from those premises.

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.

Section 9-80 of the GST Act provides a method for calculating the value of taxable supplies that are partly GST-free or input taxed. Subsection 9-80(1) of the GST Act provides that if a supply is: (a) partly a taxable supply; and (b) partly a supply that is GST-free or input taxed;

the value of the part of the supply that is a taxable supply is the proportion of the value of the supply that the taxable supply represents.

Section 9-5 provides that an entity makes a taxable supply when the requirements in that section are met. However, a supply is not a taxable supply to the extent that it is GST-free or input taxed.

A supply of food is GST-free under section 38-2 of the GST Act if it satisfies the definition of food in section 38-4 of the GST Act and it is not excluded by section 38-3 of the GST Act.

Food is defined in subsection 38-4(1) of the GST Act to include food for human consumption.

However, a supply of food is not GST-free under paragraph 38-3(1)(c) of the GST Act where it is food of kind specified in Schedule 1, or food that is a combination of one or more foods at least one of which is food of such a kind.

The entity is selling a hamper that consists of a variety of food items. As some of the food items are specified in Schedule 1, it is necessary to determine whether the hamper, which consists of various food items, contains food that is a combination of one or more foods at least one of which is food of a kind specified in Schedule 1.

Confirmation is required as to whether the phrase, 'food that is a combination of one or more foods at least one of which is food of a kind specified in Schedule 1', refers to a hamper that contains a number of separately identifiable products.

Paragraph 15AB(1)(a) of the Acts Interpretation Act 1901 provides that consideration may be given to material not forming part of an Act to confirm that the meaning of a provision is the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purposes or object underlying the Act.

Paragraph 15AB(2)(e) of the Acts Interpretation Act 1901 provides that any explanatory memorandum relating to the Bill containing the provision is extrinsic material that may be considered for this purpose.

Paragraph 1.18 of the Further Supplementary Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998 (EM) clarifies the intended scope of this provision by stating that it does not apply to a mix of packaged goods packed and sold together, such as a hamper.

Paragraph 1.18 of the EM states that where a mix of individually packaged goods is packed and sold together, these items are to be taxed individually. For example, where a hamper contains a packet of biscuits, a box of chocolates and a jar of coffee, the biscuits and chocolates are subject to GST and the coffee is GST-free. If there is a need to apportion the value of the hamper to each of the items to determine the GST payable, the rule in section 9-80 of the GST Act is relevant.

Where a mix of packaged goods is packed and sold together in the form of a hamper, the items contained in the hamper are to be taxed individually.

Some of the food items in the hamper are specified in Schedule 1. As such, individual supplies of these food items would be excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. The individual supplies of these items satisfies all the positive limbs of section 9-5 of the GST Act and are not GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity would be making taxable supplies under section 9-5 of the GST Act when it supplies these food items individually.

The other food items in the hamper are not specified in Schedule 1. Individual supplies of these food items do not come within any of the exclusions listed in section 38-3 of the GST Act. As such, the entity would be making GST-free supplies under section 38-2 of the GST Act when it supplies these food items individually.

As the entity is making a supply of a hamper that comprises of food items, some of which would be taxable supplies and GST-free supplies, the entity is making a mixed supply that must be valued under section 9-80 of the GST Act. [NOTE 1: Section 9-40 of the GST Act provides that the entity is liable for GST on the taxable supplies that it makes. Generally, an entity's GST liability is calculated as 1/11 of the consideration for the supply. Where the supply is a mixed supply, the GST liability will only be calculated on the taxable portion as determined in subsection 9-80(2) of the GST Act.

Subsection 9-80(2) of the GST Act provides that the value of the mixed supply that represents the taxable supply is calculated in accordance with the following formula: (Price of the supply * 10) / (10 + Taxable proportion)

where: 'Taxable proportion' is the proportion of the value of the supply that represents the value of the taxable supply, as expressed as a number between '0' and '1'.

Note 2: Where an entity makes a mixed supply, the tax invoice need only show the value of the taxable items and the GST-free items and not an itemised list of all products contained in the hamper.]