According to GST law, the term ‘food’ includes:
- Items intended for human consumption, regardless of whether they require processing or treatment.
- Components used in preparing human-consumable food.
- Beverages designed for human consumption, including water.
- Ingredients employed in making beverages for human consumption.
- Products meant to be combined with or incorporated into human-consumable food, like condiments, spices, sweeteners, seasonings, or flavorings.
- Culinary fats and oils available for sale.
- Any amalgamation of the above-mentioned categories.
Thus, the GST applies to the types of food described earlier in the following instances:
- Food intended for consumption within the premises from which it is supplied.
- Heated food intended for consumption off the premises.
- Food types mentioned in the table of clause 1 within Schedule 1 of the GST Act.
- Beverages and the components used in beverages not listed in the table of clause 1 within Schedule 2 of the GST Act.
- Food items as categorized in other sections of GST legislation.
Items Excluded from the Definition of Food
Certain items do not fall within the category of food according to GST regulations until they undergo processing or treatment. These items include:
- Live animals (excluding crustaceans or molluscs).
- Raw cow’s milk that has not undergone any processing.
- Grains, cereals, or sugarcane that remain untreated or unprocessed, maintaining their original form, nature, or state.
- Cultivated plants that are intended for direct human consumption without requiring additional processing or treatment.
It’s important to note that any food explicitly labeled or designated for animals does not qualify as food under GST law, as it is not intended for human consumption.
Application of GST in the Food Supply Chain
Within the food supply chain, GST is applicable at various stages. GST is imposed on food items when they are either:
- Not meant for human consumption during that specific stage of the supply chain
- Considered taxable as per GST laws
If your business is registered under GST, you can claim GST credits for the GST paid on the cost of food items you procure for your operations.
However, it’s important to understand that you cannot claim GST credits for food items categorized as ‘entertainment expenses’ and ineligible for income tax deductions.
Let’s delve into an illustration to comprehend how GST operates within the food supply chain. In this scenario:
A plant nursery vends punnets of lettuce seedlings to a market gardener. These seedlings are taxable due to their classification as cultivated plants, regardless of their ultimate use for human consumption. At this juncture:
- The plant nursery levies GST and remits it.
- The market gardener can reclaim a GST credit equivalent to the GST included in the seedlings’ price.
The market gardener cultivates the lettuce, harvests it, and then supplies it to a wholesaler. The lettuce now qualifies as GST free, given that it has transformed into a food intended for human consumption.
The wholesaler proceeds to distribute the lettuce, maintaining its GST free status, to a retailer.
The retailer, in turn, sells the lettuce to both consumers and restaurants, exempt from GST.
However, when the restaurant incorporates the lettuce into a salad that a consumer enjoys on-site, the situation shifts. The salad’s cost to the consumer becomes taxable, prompting the restaurant to pay the corresponding GST.
Thus, this example highlights the dynamic application of GST at distinct points along the food supply chain, influenced by factors such as product nature and intended use.
GST free Food Items
Although your food product may appear on the list of GST free items below, it could still be subjected to GST based on taxable regulations. For instance, bread rolls are exempt from GST unless they are sold within a restaurant. It’s important to always refer to the Taxable Food List when determining the GST status of a specific food item.
The following examples encompass foods and beverages that are considered GST free:
- Bread and bread rolls lacking a sweet coating (like icing) or filling – note that a glaze isn’t regarded as a sweet coating.
- Cooking essentials like flour, sugar, pre-mixes, and cake mixes.
- Fats and oils used for cooking purposes.
- Unflavoured milk, cream, cheese, and eggs.
- Spices, sauces, and condiments.
- Bottled drinking water.
- Fruit or vegetable juices (comprising at least 90% volume of juice from fruits or vegetables).
- Tea and coffee, except if they’re ready-to-drink.
- Baby food and infant formula (intended for children below 12 months old).
- All types of meat for human consumption, excluding prepared meals or savoury snacks.
- Fresh, frozen, dried, canned, or packaged fruit, vegetables, fish, and soup.
- Spreads meant for bread, like honey, jam, and peanut butter.
- Breakfast cereals.”
It’s vital to thoroughly understand these details, as they elucidate the range of food items that are not subject to GST, but remain subject to potential variations based on specific circumstances and applicable regulations.
Taxable Food Items
Here are examples of foods and beverages that are subject to taxation:
- Bakery items like sausage rolls, cakes, pies, pastries, bread and bread rolls having a sweet topping or filling.
- Snacks such as biscuits, crispbreads, crackers, cookies, pretzels, cones, and wafers.
- Savory snacks.
- Confectionery, ice-cream, and similar products.
- Non-alcoholic carbonated beverages with less than 100% volume of fruit or vegetable juice.
- Non-alcoholic non-carbonated beverages with less than 90% volume of fruit or vegetable juice.
- Flavored milk, carbonated or flavored water, and sports drinks.
- All food and drinks meant for immediate consumption on the premises of sale, including takeaway hot food.
- Food labeled as prepared meals and certain prepared food items, including platters.
- Any food not intended for human consumption.
- Nutritional supplements.
- Pet food or any food specifically designated for animals.”
These examples provide a clear picture of the types of food items that are liable to be taxed. It’s important to be familiar with this information to correctly identify taxable food and beverages based on their characteristics and intended use.
Now, let’s discuss some specific individual items mentioned above in more detail:
Taxable Status of Nutritional Supplements
You should be aware that the supply of nutritional supplements, including vitamins and minerals in capsule, caplet, or tablet form, is considered taxable. This is because nutritional supplements are not classified as food intended for human consumption. You can find more information about this in the Food Industry Partnership’s issues register, particularly in Issue 21.
Taxation on Pet Food
A important point to bear in mind is that pet food is subject to taxation. Any food that bears a label or designation explicitly intended for animals does not align with the definition of ‘food’ as outlined by GST law, mainly because it’s not meant for human consumption.
Taxable Nature of Prepared Meals
You should recognize that prepared meals are subject to taxation. A ‘prepared meal’ refers to a type of food that meets the following criteria:
- Directly competes with take-away establishments and restaurants.
- Requires refrigeration or freezing for storage.
- Is marketed as a prepared meal, except for soup, which is considered GST free.
Assessing Prepared Meal Status
When you determine whether a particular food item qualifies as a prepared meal, consider the following factors:
- How you promote or advertise the products.
- Aspects like the product’s name, price, labeling, instructions, packaging, and its placement within the store.
Examples of Prepared Meals
Illustrative instances of prepared meals include:
- Dishes like curry and rice, mornays, and similar cold-served items that only need reheating for consumption.
- Fresh or frozen lasagne.
- Cooked pasta dishes sold complete with sauce.
- Frozen TV dinners.
- Complete fresh or frozen meals, such as a single-serve roast dinner with accompanying vegetables, or a low-fat dietary meal.
It’s noteworthy that most of these meals, with the exception of sushi, require only reheating to become ready for consumption.
Even sushi, though a portion may be raw, is considered ready to eat upon preparation. The preparation state, whether hot or cold, and the need for cooking or reheating, do not impact the classification.
Moreover, salads, including varieties like pasta, rice, coleslaw, meat, seafood, and green salad, are exempt from GST only if they are not marketed as prepared meals. Specifically, salads sold from supermarket salad bars in the deli section or via self-serve bars fall under this exemption.
Food Items Excluded from ‘Prepared Meals’ Category
Here are examples of food items that do not fall under the classification of ‘prepared meals’:
- Frozen Vegetables
- Raw Kebabs (Skewered meat that hasn’t been cooked)
- Marinated Meats and Stir-Fries
- Uncooked Pasta Products
- Fish Fingers
- Canned Baby Food, Baked Beans, Spaghetti, and Irish Stews that don’t require refrigeration or freezing.
Furthermore, canned baby food, baked beans, and spaghetti are not categorized as ‘prepared meals’. This is because they don’t meet the condition of needing refrigeration or freezing for storage until they are opened.
Taxation on Platters and Similar Food Arrangements
You should be aware that platters and similar arrangements of food are subject to taxation. These platters can include an array of items, such as fruits, vegetables, cheeses, cold meats, or a mixture of different foods.
A platter is characterized as a large, shallow dish, often oval in shape, designed for presenting food items. Generally, a platter or food arrangement can be uncovered and placed on a table for immediate serving.
An example could be a catering arrangement at a barbecue event.
Specific Considerations for Savoury Snacks
- Caviar and other fish roe products are explicitly categorized as savoury snacks and thus, are taxable.
- Seeds and nuts that have undergone processing or treatment involving salting, spicing, smoking, roasting, or similar procedures fall under the taxable category.
- It’s worth noting that raw nuts, in their unprocessed form, are exempt from GST.
Taxation on Confectionery
You must also be aware that confectionery items are subject to GST. Confectionery includes foods that are specifically marketed as such. These can encompass:
- Muesli bars
- Glace fruit.
However, it’s important to understand that candied peel is an exception and is considered GST free.
Hot Food and GST
The term ‘hot food’ refers to food items intended for consumption that have been heated beyond the ambient air temperature.
Additionally, both hot and cold food items presented as a single unit for off-premises consumption, such as a sausage and onion on a slice of bread, are subject to GST.
Freshly Cooked and Warm Food
Food that you offer for sale while it’s still warm from being recently cooked is considered GST free, unless it falls into a different category of taxable food. An example of this is freshly baked bread, which is exempt from GST.
Thus, understanding all these distinctions between different food categories is essential, as they define the taxation status of food based on their individual characteristics and preparation methods.
Foods with Mixed GST Status
In such cases, you can make this determination by considering both the physical attributes of the product and the nature of the sale.
For example, you might conclude that a food product is intended for non-food use because:
- It is named something other than food.
- It is stored in conditions or containers unsuitable for food.
- It is packaged in containers not typical for food products.
- It is labeled, invoiced, or marketed as a non-food item.
- It is delivered in a manner unsuitable for food consumption.
Snack packs have the potential to include a mix of both GST free and taxable items. The determination of how to treat them for GST purposes hinges on their contents and packaging.
Hampers and Blended Supplies
In scenarios where a combination of individually packaged goods, some GST free and others taxable, are bundled and sold together—such as a hamper featuring items like biscuits, chocolates, a coffee cup, and a jar of coffee—the taxation approach is to treat each item separately within the mixed sale.
Consequently, the biscuits, chocolates, and cup are considered taxable, while the coffee remains GST free.
Defining a Hamper
A hamper can manifest as a basket, ornamental box, or similar container holding a variety of distinct products. If the hamper’s packaging possesses lasting value, like a picnic basket, the sale of that packaging is subject to GST.
Food Beyond Its Use-By Date
Food that has exceeded its use-by date isn’t inherently unsuitable for human consumption. However, the use-by date can serve as a guiding factor to assess whether the food remains fit for human consumption.
Should the food be deemed unsafe for human consumption, it’s important to note that it is not considered food under GST law and is consequently taxable.
Impact of Marketing on Food GST Status
You play a vital role in determining the GST status of food items based on how they are marketed.
The way these goods are promoted or advertised, as well as factors like the product’s name, price, labeling, instructions, packaging, and their placement within the store, all come into play.
GST free Products Based on Marketing
Certain food products are classified as GST free based on their marketing context. These include:
- Fats and oils marketed for culinary usage.
- Malt extract primarily marketed for drinking.
- Preparations mainly marketed as tea, coffee, or malted beverages.
- Preparations marketed as substitutes for tea, coffee, or malted beverages.
- Dry preparations marketed for enhancing milk flavors.
- Beverages and ingredients for beverages primarily marketed as food for infants or invalids.
Taxable Products Due to Marketing
On the other hand, specific food items are subject to taxation due to their marketing context. These include:
- Food marketed as prepared meals (excluding soup).
- Food marketed as confectionery.
- Food marketed exclusively as ingredients for confectionery.
- Flavored ice-blocks, regardless of whether they are frozen or not.
Thus, you must know these dynamics of marketing and its influence on the GST classification of food products to determine their taxation status correctly.
Understanding Premises in the Context of GST
GST implications are associated with food based on where it is consumed, either on the premises where it’s sold or as hot food for consumption off-site.
The term ‘premises’ holds a specific definition within the GST Act. It pertains to:
1. Location of Sale
The place where the sale transpires.
Examples include establishments like supermarkets, restaurants, cafes, snack bars, hotels, clubs, reception lounges, aircraft, boats, and trains.
2. Grounds Surrounding Certain Establishments
This covers the surrounding areas of restaurants, cafes, snack bars, hotels, clubs, and venues used for catered functions.
3. Leisure, Sport, and Entertainment Venues
Various venues associated with leisure, sports, or entertainment, featuring clear boundaries or limits.
This includes places like:
The definition of ‘premises’ excludes public thoroughfares, unless a specific area has been designated for use in connection with a food supply outlet.
GST Implications for Food Packaging
When you buy packaging products, remember that they generally have GST added to their cost. However, as a GST-registered business, you can get a credit for the GST included in the packaging price.
If you provide packaging along with or around food, and this packaging is considered important for selling the food, then the way GST is applied to the packaging usually follows the same rules as the food itself.
This means that if the food is GST free, the packaging around it is also treated as GST free.
GST free Packaging for Necessary Food
You should understand that packaging for food that is GST free is also exempt from GST.
Packaging which serves the purposes of containing, safeguarding, and promoting the food is an essential and necessary part of the food supply. This type of packaging falls under the category of ‘normal and necessary.’
For individual items, this includes things like tins, bottles, jars, and boxes. For groups of items, it refers to the carton or box that holds multiple individual items.
Special Scenario for Packaging
Even packaging that wouldn’t usually fall under the ‘normal and necessary’ category can be considered as such (and therefore, GST free) when it meets two conditions:
- It’s not given a separate price.
- The packaging’s cost is either:
- $3 without GST, or
- 20% of the wholesale value of the total sale, whichever is lower.
This rule even applies to items that would generally attract GST if sold individually. For example:
- Providing paper and plastic bags for free to customers for groceries.
- Offering containers, spoons, straws, or similar items for free to aid buyers in preparing or consuming the food, as long as these objects have no lasting value (for instance, they’re disposable).
Taxation of Packaging Beyond Standard Necessity
Packaging that exceeds what is typically deemed normal and necessary for selling the food is subject to taxation.
For instance, if you offer breakfast cereal within a reusable plastic container, the container itself falls under the taxable category. In such cases, the transaction entails:
- Partially taxable (container)
- Partially GST free (cereal)
However, it’s important to note that special promotional packaging, like a spice rack, doesn’t fall under the category of normal and necessary.
Similarly, promotional items that accompany food and packaging, such as durable drink containers and lasting-value recipe books, are not considered normal and necessary either.
Calculating Tax Separately
It’s important to perform separate calculations for:
- The tax applicable to promotional items that come with the food.
- The tax related to packaging and items that are typically supplied independently.
With these guidelines, you can easily navigate the taxation intricacies associated with promotional items and packaging in relation to food sales.
This article is for general information only. It does not make recommendations nor does it provide advice to address your personal circumstances. To make an informed decision, always contact a registered tax professional.