GST and FOOD LABELS – fat into the fire, or fire into the fat?

Have you achieved a favourable GST-free ruling for your existing F&B product partly by changing the wording and information on the packaging, but landed yourself in hot water by breaching Food Label Codes??Did you even realise that’s an issue? Indeed, is hot water GST-free or taxable?

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Have you gone to great lengths to comply with the detailed and technical requirements of the Food Label Codes for a new product, but now realise that you’ve described the product, contents, ingredients or uses on the label in a way that’s inconsistent with your desired GST-free status for your product, and the GST-free classification of your closest competitor’s product??Again, did you know, or even think about it?

Can you have your cake and eat it too??Sorry Mr Hewson! Yes you can, but words to describe a product for the consumer and for GST purposes are often very different to the words that must be used to comply with Food Label Codes, as well as consumer protection laws.?Great care must be taken by ensuring you have all of the bases covered.

Judicial decisions have recently been handed down in relation to GST on particular food products (some Chobani Flip Yoghurts and some Bird’s Eye Frozen products).?They were all determined to be subject to GST. ?

The ATO is also currently updating and modernising its Public Rulings (eg the Detailed Food List) and approach to classifying F&B products (eg what some words and phrases like ‘similar’ and ‘of a kind’ mean for GST purposes).?That might become the catalyst for you seeking a better GST classification by changing the labelling. ?

There are only a few GST categories of supplies that are impacted by a ‘marketing’ test and most are in the F&B sector.?It’s also been judicially determined that ‘marketing’ has a very broad meaning for GST purposes, and that includes words stated on packaging and labels.?While labelling can be influential, it’s not determinative for GST purposes.

Sometimes potential GST classifications will influence what a manufacturer wishes to state, illustrate or include on packing, displays, product information sheets and other marketing collateral. For example, certain ranges of yoghurt might be marketed as a ‘yoghurt drink’ (likely to be a taxable beverage for GST purposes) or ‘pourable yoghurt’ (likely to be a GST-free food for GST purposes), even though the product and container are the same.??

There’s also the possibility that products will be imported in bulk for use in manufacturing under a description that achieves a customs duty free status and possibly also a GST-free status at that point.?However, as the product progresses down the chain towards the consumer, its size, packaging, description and uses change.?That GST-free status might not be achievable at retail level, especially when you consider Food Label Codes.

It's critical that a multi-regulatory approach always be taken to ensure that achieving a favourable outcome for one regulatory regime does not breach or cause an unfavourable outcome for another regime.

Don’t take chances by rolling the dice on GST, or on other F&B regulatory matters. There’s often a ‘sweet spot’ where full compliance is achieved, and best GST outcomes arise, all while effectively marketing your products successfully. ?

Take away (no pun intended):?always consider both Food Label Codes and GST classifications for F&B products. ?