GST and psyllium husks

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 psyllium husks?

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

The entity is a food supplier. The entity sells psyllium husks.

Psyllium husks are a type of bran, similar to oat bran, wheat bran, barley bran and rice bran. They are used to sprinkle onto cereal and are sometimes added to beverages such as water, juice and milk as a means of ingesting them.

The entity is registered for goods and services tax (GST). The supply meets the other positive limbs of section 9-5 of the GST Act.

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 from being GST-free by section 38-3 of the GST Act.

Food is defined in section 38-4 of the GST Act. Paragraph 38-4(1)(a) of the GST Act lists 'food for human consumption (whether or not requiring processing or treatment)'. The phrase 'food for human consumption' is not defined in the GST Act. As 'food' has a special meaning as defined in the GST Act, it is considered the phrase 'food for human consumption' takes on the ordinary meaning of the word 'food'.

'Food' is defined in The Macquarie Dictionary (1997) as 'what is eaten, or taken into the body, for nourishment...'

Therefore, it needs to be determined whether a psyllium husk is eaten or taken into the body for nourishment. The official American Nutraceutical Association Guide, 'Nutraceuticals - The Complete Encyclopedia of Supplements, Herbs, Vitamins and Healing Foods' , provides that psyllium seed is: 'one of the most popular bulk-producing laxatives. As a supplement or laxative, it is made of the cleaned, dried ripe seed of the Plantago psyllium plant, which is grown mainly in India. The outer covering or husk of the seeds contains a thick, gel-like material-soluble fibre- that is not digested by humans. When this soluble fibre comes in contact with water, it swells, providing both bulk and lubrication to the mass of food as it moves through the intestinal tract'.

It is considered that the essential character of psyllium husks is not that of food for human consumption, but that of a supplement or laxative. Therefore, psyllium husks do not satisfy paragraph 38-4(1)(a) of the GST Act.

Alternatively, it needs to be considered whether psyllium husks satisfy paragraph 38-4(1)(d) of the GST Act which lists 'ingredients for beverages for human consumption'.

Psyllium husks are only added to beverages as a means of taking them. Psyllium husks are not considered to be an ingredient for the beverage itself. As such, the psyllium husks do not satisfy paragraph 38-4(1)(d) of the GST Act. Therefore, psyllium husks do not satisfy the definition of food in section 38-4 of the GST Act. As such the entity is not making a GST-free supply under section 38-2 of the GST Act.

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 any other provisions in 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 psyllium husks.