ATO Interpretative Decision
ATO ID 2004/522
Goods and Services Tax
GST and frozen raw frankfurt in pastryFOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a frozen raw frankfurt in pastry?
Decision
No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies a frozen raw frankfurt in pastry.
The entity is making a taxable supply under section 9-5 of the GST Act.
Facts
The entity is a food supplier. The entity supplies a frozen raw frankfurt in pastry.
The product consists of a raw frankfurt wrapped in puff pastry with other raw ingredients. The product is supplied frozen, presented on a tray and wrapped in cling wrap. The product cannot be consumed until it has been baked.
The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.
Reasons for Decision
A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded by section 38-3 of the GST Act.
Food is defined in section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment)(paragraph 38-4(1)(a) of the GST Act). The frankfurt in pastry is food for human consumption and therefore, satisfies the definition of food in paragraph 38-4(1)(a) of the GST Act.
However, paragraph 38-3(1)(c) of the GST Act provides that a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1).
Item 22 in Schedule 1 (Item 22) lists pies (meat, vegetable or fruit), pasties and sausage rolls. Therefore, it must be determined whether a frozen raw frankfurt in pastry is a kind of pie (meat, vegetable or fruit), pastie or sausage roll.
The phrase 'of a kind' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that term. The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, NSW does not define the entire phrase 'of a kind', however it defines the word 'kind' to mean:
1. A class or group of individuals of the same nature or character, especially a natural group of animals or plants. 2. Nature or character as determining likeness or difference between things: things differing in degree rather than in kind. 3. A person or thing as being of a particular character or class: he is a strange kind of hero. 4 ...
Accordingly, something will be 'of a kind' if it is of the same nature or character (possessing the same distinguishing qualities) as the thing or group in question.
The term 'sausage roll' is not defined in the GST Act and therefore, takes on its ordinary meaning. The Macquarie Dictionary 1997 defines sausage roll to mean 'a roll of baked pastry filled with sausage meat'. A sausage roll is generally made of puff pastry. The pastry dog consists of a raw frankfurt wrapped in puff pastry with other raw ingredients and is a kind of sausage roll.
In addition, clause 2 of Schedule 1 operates to ensure that foods in the table relating to the category of prepared food, bakery products or biscuit goods, are not GST-free regardless of whether they are supplied hot or cold, or require cooking, heating, thawing or chilling prior to consumption. Item 22 relates the category of bakery products. Therefore, even though the pastry dog is raw and frozen, it is still food of a kind listed in Schedule 1. Thus, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies a frozen raw frankfurt in pastry.
The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision of Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a frozen raw frankfurt in pastry.
Date of decision: 18 October 2002
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
Division 38
section 38-2
section 38-3
paragraph 38-3(1)(c)
section 38-4
paragraph 38-4(1)(a)
Division 40
Schedule 1 clause 1
Schedule 1 clause 1 table item 22
Schedule 1 clause 2
Other References:
The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, NSW
Keywords
Goods and services tax
GST free
GST food
Food for human consumption
GST supplies & acquisitions
Taxable supply
Bakery products
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 18 October 2002 | Original statement |
| 11 November 2005 | Archived |