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Date of advice: 15 November 2017
Subject: GST and food
Are the salads GST-free food?
Relevant facts and circumstances
● You are registered for goods and services tax (GST).
● You carry on the business of supplying food products.
● You sell a range of salads through the fresh food section in the supermarkets.
● The salads retail prices are comparable to the food products displayed in the fresh food section.
● The packaging provides some suggestions on the serving of your salads.
● The packaging also displays pictures of the individual component salad ingredients.
● The salad ingredients are packed with condiments inserted in individually sealed sections and are mixed before consumption. The direction on the packaging labels advises consumers to open individual component salad ingredients, mix all the ingredients with the salad leaves.
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 subsection 38-3(1)
A New Tax System (Goods and Services Tax) Act 1999 section 38-4
Reasons for decision
The supplies of the salads are GST-free food under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). The salads are not food of the kind listed under section 38-3 of the GST Act.
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 from being GST-free under 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) or ingredients for food for human consumption.
The salads are marketed and displayed in the fresh produce section of the supermarkets. Therefore, the salads satisfy the definition of food under section 38-4 of the GST Act as they are food for human consumption (whether or not requiring processing or treatment) or ingredients for food for human consumption.
However, foods are not GST-free food if they are the kind that are listed under subsection 38-3(1) of the GST Act, which states:
A supply is not GST-free under section 38-2 [of the GST Act] if it is a supply of:
(a) *food for consumption on the *premises from which it is supplied; or
(b) hot food for consumption away from those premises; or
(c) food of a kind specified in the third column of the table in clause 1 of Schedule 1, or food that is a combination of one or more foods at least one of which is food of such a kind; or
(d) a *beverage (or an ingredient for a beverage), other than a beverage (or ingredient) of a kind specified in the third column of the table in clause 1 of Schedule 2; or
(e) food of a kind specified in regulations made for the purposes of this subsection. provides that., treatment, including (in section (1)(c)) food specified in the table in clause I of Schedule I of the GST Act.
* is a defined term in the GST Act
The salads are not food of the kind listed under paragraphs 38-3 (1) (a), (b) (d) and (e) of the GST Act. You advise that the salads are displayed and sold through the fresh food section of the supermarkets. Therefore, the salads will not be consumed on the supermarket premises. The salads are not a hot food or a beverage. The salads are not food of a kind specified in the A New Tax System (Goods and Services Tax) Regulations 1999).
The next issue to consider is whether the salads are listed as food in the third column of the table in Clause 1 of Schedule 1 of the GST Act (Clause 1). The relevant item which may be applicable to your salads is item 4 of Clause I, which is about a prepared meal but not including soup.
Issue 5 of the Australian Taxation Office (ATO) “Food Industry Partnership" Issue Register (Issue 5) provides the ATO's view on prepared food. You may view the issue register at www.ato.gov.au.
Issue 5 states:
food marketed as a prepared meal, but not including soup". The Further Supplementary Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998 ("the EM") provides that the term 'prepared meal' is intended to cover a range of food products that:
● directly compete against take-aways and restaurants;
● require refrigeration or freezing for storage (clause 3 of Schedule 1); and
● are marketed as a 'prepared meal'.
The term 'prepared meal' is not defined in the GST Act and will therefore bear its ordinary meaning.
The Macquarie Dictionary provides that 'meal' means "the food eaten or served for a repast". This definition could be applied to a single food item or to a meal consisting of several food items.
The Macquarie Dictionary defines 'prepare' in relation to food as "to get ready for eating, as a meal, by due assembling, dressing or cooking".
In addition, Issue 5 provides some guidance on the meaning of prepared meal. They are:
Further to the above, 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.
Clause 3 of Schedule 1 of the GST Act (Clause 3) states that
Item 4 in the table only applies to *food that requires refrigeration or freezing for its storage
Your salads are not marketed as food products which will compete against takeaways and restaurant foods. This is evidenced by marketing and pricing of the salads. Your salads are sold in the fresh food section of the supermarket and the prices similar to fresh food, rather than takeaways.
Your salads generally do not require special refrigeration or freezing for its storage (other than the requirement for fresh food). The salads ingredients are packed with condiments inserted in individually sealed sections and are sold in the fresh food sections of the supermarket. They therefore do not have any special refrigeration or freezing requirement.
Your salads are not marketed as prepared meals. The packaging provides some serving suggestions. However, the consumers must open the individually sealed sections of condiment and sachets, to mix before consumption. In addition your salads are sold through the fresh food section in the supermarket.
Based on the above, we consider the salads are not prepared meals and therefore are not food listed under item 4 of Clause 1. As the salads are not food specified in the third column of the table in Clause 1, the supplies of the salads are therefore GST-free food under section 38-2 of the GST Act.