Commissioner issues final PSLA on GST classification of food and beverage

Last week the Commissioner issued PSLA 2012/2 (GA) – ‘GST classification of food and beverage items’.  The Practice Statement sets out the following matters:

  • arrangement between the ATO and GS1 Australia to ensure that food and beverage items shown on the GS1net are correctly classified for GST purposes.
  • the administrative approach the ATO will take for past years or periods where manufacturers and other suppliers have applied the ATO confirmed GST classification on GS1net
  • the procedure for tax officers to follow and matters to take into account when considering a change in the GST treatment of food or beverage item listed on GS1net.

The ATO had previously entered into an arrangement with GS1 Australia, which ensured that food and beverage items were correctly classified for GST (see Fact Sheet NAT 7162 ‘Simpler GST accounting for the food and grocery industry) which apple from 1 July 2002.  This Practice Statement outlines the Commissioner’s administrative approach in respect of that arrangement from 1 July 2010.

GS1 Australia is an organisation that administers a system of number, bar coding and electronic messaging.  GS1 Australia numbers and barcodes are on most food and beverage items sold in retail stores.  Manufacturers and other suppliers register with GS1 Australia.

The arrangements in the Practice Statement are intended to provide certainty and to minimise compliance costs for suppliers that rely on the GS1 net system to determine the GST classification of their products.  This certainty will be provided by the ATO undertaking that, where suppliers have relied on an ATO confirmed classification in GST1, changes to that GST classification will only be applied prospectively.  In determining this prospective date, the statement acknowledges that industry practice will generally require a minimum of 30 days from the notification of the change to implementation through the supply chain.

The ATO classification in the GS1 system does not have the legal status of a ruling.  Where a manufacturer or supplier disagrees with the classification, it can seek a private ruling, which has review rights attached.

The PSLA was issued in draft form as Draft PSLA 3541: GST classification of food and beverage items and my post on the draft can be accessed here.

The Practice Statement must be followed by tax officers unless doing so creates unintended consequences or is considered incorrect, upon which tax officers must follow their business line’s escalation process.

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