Decision impact statement

Food Supplier and Commissioner of Taxation

Court Citation(s):
[2007] AATA 1550
2007 ATC 157
99 ATR 938

Venue: Administrative Appeals Tribunal
Venue Reference No: NT 2005/468
Judge Name: Downes
Judgment date: 16 July 2007
Appeal on foot:
No

Impacted Advice

Relevant Rulings/Determinations:

• GSTR 2001/8

Subject References:
Goods and services tax
supply
consideration
in connection with
mixed and composite supplies
apportionment
packages containing food and non-food products
General interest charge
no jurisdiction to remit

Précis

Outlines the Tax Office response to this case which concerned the supply of a GST-free food product packaged with a non-food product for a single price and whether GST was payable on the supply of the non-food product.

Brief summary of facts

The Applicant was a food supplier. The Applicant sold GST-free food products like instant coffee.

Sometimes the Applicant supplied its food product packaged with a non-food product. It did this for the purposes of promotion. The non-food products included items such as mugs, alarm clocks, radios and cricket balls. The non-food products were branded with the Applicant's name. The combined packages were sold for the same price as the food product alone. The non-food product was labelled as 'free'. The non-food product could only be acquired in packages with the food products. The Applicant did not supply the non-food products alone free of charge.

The Applicant was assessed to GST on the supply of the non-food products. The food products were GST-free. General interest charge (GIC) was imposed for failure to pay its GST liability in respect of the supply of the non-food products on time. The Applicant objected, and following the disallowance of the objection, applied to the AAT for review of the objection decision and the GIC.

Issues before the AAT

Whether GST was payable on the supply of the non-food product.

How the GST payable was to be calculated.

Whether GIC should be remitted.

Issues as decided by the AAT

The AAT found against the Applicant and held that the supply of the non-food product was taxable and that the AAT had no jurisdiction to entertain the application to remit GIC. President Downes decided as follows.

•

The supply of the packaged products was for consideration.

•

The consideration was for the supply of the packaged products as a whole, including the non-food product. The consideration for the supply of the food and non-food products was the single price paid for the two of them. The purchaser made a payment 'in connection with' the supply as a whole.

•

It was dangerous to equate 'free' with the absence of consideration. While the non-food product was labelled 'free', it did not follow that, as a component of the package, the non-food product was without consideration.

•

It did not matter that the food product was simultaneously sold separately for the same price - the food product was actually being sold at a discount.

•

The supply of the packaged products was a mixed supply. The non-food products were not integral, ancillary or incidental to the main food products. The non-food products had intrinsic value, would not be consumed with the food and were mostly unconnected with the food. This was so even where, for example, the food product was a jar of coffee and the non-food product was a mug in which the coffee could be served.

•

The United Kingdom decisions of Kimberly-Clark Ltd v Customs and Excise Commissioners [2004] STC 473 and Tesco plc v Customs and Excise Commissioners [2003] STC 1561 were found to be distinguishable on the facts, with the latter case also distinguishable on the legislation.

•

The supply of the packaged products was partly taxable (the non-food product) and partly GST-free (the food product).

•

Section 9-80 required apportionment of the value of the packaged products as between the taxable non-food product and the GST-free food product.

•

The Commissioner's discretion to remit GIC under section 8AAG of the Taxation Administration Act 1953 was not a reviewable decision because it was not a part of the Commissioner's assessment.

President Downes' reasons for decision also included a tentative opinion that the apportionment made by the Commissioner (based on the price paid by Food Supplier to acquire the non-food products) was reasonable.

Tax Office view of Decision

The decision of the AAT is consistent with the views expressed by the Commissioner in GSTR 2001/8 entitled 'apportioning the consideration for a supply that includes taxable and non-taxable parts'.

Administrative Treatment

Not relevant.

Implications on current Public Rulings & Determinations

None.

Implications on Law Administration Practice Statements

None

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
9-5
9-10
9-15
9-80
11-5
11-20
38-2

Taxation Administration Act 1953
8AAG
105-50

Case References:
Cachia v Commissioner of Taxation (No 2)
[2005] AATA 819
2005 ATC 2297
61 ATR 1015

Chief Commissioner of State Revenue v Dick Smith Electronics Holding Pty Limited
[2005] HCA 3
(2005) 221 CLR 496
2005 ATC 4052
58 ATR 241
213 ALR 230

HP Mercantile Pty Limited v Commissioner of Taxation
(2005) 143 FCR 553
2005 ATC 4571
60 ATR 106
219 ALR 591

Kimberly-Clark Ltd v Customs and Excise Commissioners
[2004] STC 473

Nationwide News Pty Limited v Australian Competition and Consumer Commission
(1996) 71 FCR 215
142 ALR 212

Nyack Investments Pty Limited v Commissioner of Taxation
[2005] AATA 469
2005 ATC 2173
59 ATR 1116

Pye v Commissioner of Taxation
[2004] AATA 143
2004 ATC 2029
55 ATR 1024

Tesco pc v Customs and Excise Commissioners
[2003] STC 1561

The Taxpayer v Commissioner of Taxation
[2005] AATA 1039
2005 ATC 213
61 ATR 1044