Issue
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 brandy snaps?
Decision
No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells brandy snaps. The entity is making a taxable supply under section 9-5 of the GST Act.
Facts
The entity is a food supplier that sells brandy snaps. A brandy snap is a thin, sticky, ginger biscuit flavoured with brandy.
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.
Reasons for Decision
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 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)'. Brandy snaps satisfy the definition of food in section 38-4 of the GST Act because they are food for human consumption.
However, paragraph 38-3(1)(c) of the GST Act provides that 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). Item 32 in Schedule 1 (Item 32) relates to 'Biscuit goods' and is of particular relevance.
Item 32 specifies that food that is, or consists principally of, biscuits, cookies, crackers, pretzels, cones or wafers, is not GST-free. As brandy snaps are a kind of biscuit, they are considered to be food of a kind specified in Item 32. As such, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells brandy snaps.
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 brandy snaps.