The product which was the subject of the test case is comprised of a main compartment containing strawberry flavoured yoghurt and a separate smaller compartment containing dry inclusions (i.e. a mixture of cookie pieces and white chocolate chips). The smaller compartment is designed so it can be bent to tip or “flip” the dry inclusions into the yoghurt before consumption.
The decision was essentially reached on the basis of the following:
- The dry inclusions form a significant aspect of the marketing and consumer experience of the product, are readily identifiable and do not amount to a standalone product separate from the yoghurt. As such, the product is a combination of the strawberry flavoured yoghurt, cookie pieces and white chocolate chips.
- The cookie pieces and white chocolate chips – being covered by the definition of “biscuit goods” and “confectionary”, respectively – are food of a kind specified in the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (“the GST Act”) as not being GST-free.
- The product – being a combination of one or more foods at least one of which is food of a kind specified in the GST Act as not being GST-free – is therefore also precluded from being GST-free.
This test case highlights the increasing complexity of the classification of food for GST purposes, with the way in which products are marketed, packaged, and consumed often being a deciding factor. Given the innovations in the food industry over the last few years, including the heightened focus on health and the environment – such as in the domains of plant-based products and lab-grown meats – and the combinations of different food types, the GST treatment of food can be an exceedingly grey area.
We note that this complexity poses a great risk for suppliers that sell high quantities of food products (such as manufacturers and supermarkets), as an incorrect GST classification can have a material impact, particularly with the GST review period being four years.
We strongly recommend that taxpayers seek advice, and an ATO private ruling if necessary, to confirm the classification of their supplies of food for GST purposes. Our GST specialists are happy to provide assistance in this regard.