GST and dry-roasted seeds

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 supplies dry-roasted seeds?

No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies dry-roasted seeds. The entity is making a taxable supply under section 9-5 of the GST Act.

The entity is a food supplier that supplies dry-roasted seeds.

The seeds are dry-roasted in the oven from raw processed sunflower seeds, pumpkin seeds and sesame seeds. The dry-roasted seeds are food for human consumption. The dry-roasted seeds are marketed as an accessory to a meal, for example to be sprinkled on salad or soup.

The dry-roasted seeds are packaged into various combination of seeds.

The dry-roasted seeds are not sold for consumption on the premises from which they are supplied.

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.

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 subsection 38-4(1) to include food for human consumption. The dry-roasted seeds are 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 specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). In this case, item 16 in the table in Schedule 1 (Item 16) is relevant.

Item 16 lists seeds or nuts that have been processed or treated by salting, spicing smoking or roasting, or in any other similar way. The seeds are dry-roasted in the oven and are therefore covered by Item 16. Accordingly, the supply of the dry-roasted seeds is not GST-free 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 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 supplies dry-roasted seeds.