GST and the supply of food grade fish as bait

Is the entity, a commercial fisherman, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when they supply food grade fish for use as bait?

No, the entity is not making a GST-free supply under section 38-2 of the GST Act, when they supply food grade fish for use as bait. The entity is making a taxable supply under section 9-5 of the GST Act.

The entity is a commercial fisherman. The entity supplies fresh, unprocessed, food grade fish exclusively for use as bait. The fish are not alive when sold.

The entity is registered for goods and services tax (GST) and 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 if the product satisfies the definition of food in section 38-4 of the GST Act and the supply 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 to include food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act). The entity is supplying food grade fish, which is fit for human consumption. However, the entity is not supplying the fish for that purpose. The entity is supplying the fish for use as bait. Therefore, the entity is supplying a product that can be used for both food and non-food applications.

If a supplier differentiates a product to be supplied as food from a product to be supplied for industrial or other non-food uses, the latter supply is not considered to be a GST-free supply of food under section 38-2 of the GST Act. Some of the ways in which a dual-purpose food product is considered to be differentiated for a non-food use are: • designation as something other than food; • storage in conditions or containers that are unsuitable for food; • labelling, invoicing or marketing as a non-food product; or • delivery in a manner unsuitable for food.

The entity designates the fish as something other than food when they supply the fish for use as bait. As such, the fish is not food for human consumption despite the fact that the fish is of food grade quality, and therefore, does not amount to food for the purposes of section 38-4 of the GST Act. Accordingly, the entity is not making a GST-free supply under section 38-2 of the GST Act when they sell food grade fish for use as bait.

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 of the 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 they sell food grade fish for use as bait.