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Date of advice: 15 November 2017
Subject: GST and food
Are the supplies of your packaged salad products GST-free?
Yes, the supplies of your packaged salad products are GST-free.
Relevant facts and circumstances
● You are registered for goods and services tax (GST).
● You supply food products as you have described.
● You have developed several new salad products that you will commence supplying to retailers shortly.
● You have provided relevant details of the products.
● The products will be supplied in a sealed plastic container, and by their very nature, require refrigeration for storage.
● As they will be supplied at a wholesale level, they will not be ‘consumed on the premises’ from which they are supplied.
● You have provided information about promotion.
● It is not intended that other ingredients are required to be added to the salad itself, and the packaging of each salad does not contain separate components requiring assembly by the consumer.
● The primary and intended usage of each salad is as a meal accompaniment or a component of a meal, however each salad may potentially be consumed on its own depending on the consumption requirements of the consumer.
● The serving instructions on the product packaging will indicate that the salad should be served as an accompaniment with other food.
● You salads will be ready for consumption as you have detailed.
● You advise that the salad products will not be marketed as a prepared meal.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 38-2
A New Tax System (Goods and Services Tax) Act 1999 section 38-3
A New Tax System (Goods and Services Tax) Act 1999 paragraph 38-3(1)(c)
A New Tax System (Goods and Services Tax) Act 1999 section 38-4
Reasons for decision
A supply of food is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) if it satisfies the definition of food in section 38-4 of the GST Act, and it does not come within any of the exclusions in section 38-3 of the GST Act.
The meaning of food in section 38-4 of the GST Act includes food for human consumption (whether or not requiring processing or treatment).
The packaged salads are food for human consumption and therefore fall within the meaning of food in section 38-4 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 that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Of specific relevance is item 4 of Schedule 1 (Item 4), which provides that food marketed as a prepared meal (but not including soup) is not GST-free.
Therefore, the classification of the salad products depends on whether they are considered to constitute a 'prepared meal'.
A prepared meal is intended to cover a range of food products of a kind that meet all three conditions below:
● directly compete against takeaways and restaurants
● require refrigeration or freezing for storage, and
● are marketed as a ‘prepared meal’.
Salads, including pasta, rice, coleslaw, meat, seafood, or green salad, sold from salad bars at supermarkets in either the delicatessen section or from a self-serve bar, are GST-free provided they are not marketed as a prepared meal.
In determining whether food is marketed as a 'prepared meal' the activities of the seller are relevant. Consideration is given to the following:
● the name of the goods
● the price of the goods
● the labelling on any containers for the goods
● literature or instructions packed with the goods
● how the goods are packaged
● how the goods are promoted or advertised, and
● how the goods are distributed.
In this case, on the information provided, the salad products will not be marketed as a prepared meal.
Therefore, the salad products are not covered by Item 4. Furthermore, the salad products are not covered by any other item in Schedule 1, nor do they come within any of the other exclusions listed in section 38-3 of the GST Act.
Accordingly, you will be making GST-free supplies under section 38-2 of the GST Act when you sell the packaged salads.
Please be advised that if the promotional mix or packaging information changes from what has been advised and/or the salad products are marketed as a prepared meal, the GST status of the product may change from GST-free to taxable.