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November 2016 Question of the Month - GST on Processed and Unprocessed Milk

  • 123 posts
  • # 114151

Why are dairy farmers charged GST when their milk is picked up from the dairy, (before any processing), but it is sold at the supermarket GST free?

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  • 172 posts
  • # 114183

admin@ICB said:

Why are dairy farmers charged GST when their milk is picked up from the dairy, (before any processing), but it is sold at the supermarket GST free?


 

  • Food fit for human consumption sold at the farm gate is GST-free, except for unprocessed cow’s milk which is subject to GST

I believe this concession was made to the dairy farmers (at their request) primarily to assist them with cash flow.

Also note, milk before it is processed is not fit to be sold as 'food'.



Edited at 26 Nov 2016 05:43 AM GMT

  • 123 posts
  • # 114326

It is true, unprocessed cow’s milk is subject to GST. And yet once it has been processed in any way, it will become GST free.

This is because at the “raw” stage, before processing, the milk is not considered to be food “fit for human consumption” and is excluded from the definition of “food”. But once it becomes a product that is deemed to food for human consumption, it is GST free under Section 38-4 of the GST act exemptions provisions for food.

Similarly, live animal sales are subject to GST, but once the animal has been killed and inspected by an authorised person as fit for human consumption, the meat becomes GST free food.

Just to keep things interesting, goat and sheep milk is GST free, whether it has been processed or not.

References



Edited at 19 Jan 2017 06:30 AM GMT

  • 2 posts
  • # 117655

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