Disclaimer
You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1051309477257

NOTICE

This edited version has been found to be misleading or incorrect.

This notice must not be taken to imply anything about:

      ● the binding nature of the private advice issued to the applicant

      ● the correctness of other edited versions.

Edited versions cannot be relied upon as precedent or used for determining how the ATO will apply the law in other cases.

Date of advice: 27 November 2017

Ruling

Subject: GST and food

Question

Is your supply of takeaway salads GST-free?

Answer

Yes, based on the information provided, your supply of takeaway salads is GST-free.

Relevant facts and circumstances

You are registered for goods and services tax (GST).

You supply salads from a takeaway outlet in a food court. The salads are prepared on the premises and some contain hot grilled meats.

The grilled meat is hot when placed on top of the refrigerated salad ingredients. The addition of the hot grilled meat will not raise the temperature of the entire salad to above room temperature.

The salads are sold individually or in ‘combo’ meals with a drink.

The salads are never marketed as a prepared meal.

You do not ask customers if they wish to consume the salads in the food court or take them away for consumption. The same takeaway container with a lid is used for all sales (only the size may be different).

You do not have different menus or products for dine-in and takeaway customers nor do you have separate ordering and/or serving processes for dine-in and takeaway customers.

The salads are not served at a table, in alternative containers (depending on where it is to be eaten) or on a tray.

Customers make their own choice on where the food is to be consumed. You believe that the majority of your customers take the salads back to the workplace. Only a minority would choose to eat in the food court environment provided by the shopping centre.

You are currently treating all of the salads with hot grilled meats as taxable for GST purposes.

The receipt/tax invoice provided to customers lists the items purchased and the GST included. You consider that most of your customers would not be registered for GST.

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 section 38-4

Reasons for decision

Section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that a supply of food is GST-free 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 by section 38-3 of the GST Act.

The term ‘food’ is defined in section 38-4 of the GST Act and includes, at paragraph 38-4(1)(a) of the GST Act, food for human consumption (whether or not requiring processing or treatment). Salads are food for human consumption and therefore, they will satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act.

However, subsection 38-3(1) of the GST Act provides, amongst other things, that a supply of food is not GST-free if it is a supply of:

      ● food for consumption on the premises from which it is supplied

      ● hot food for consumption away from those premises, or

      ● food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1).

Food for consumption on the premises from which it is supplied

Paragraph 38-3(1)(a) of the GST Act provides that a supply of food for consumption on the premises from which it is supplied is not GST-free. This is irrespective of whether the item of food would be GST-free if sold in other circumstances.

The term 'premises' is defined in section 38-5 of the GST Act. This section states:

    Premises, in relation to a supply of *food, includes:

    (a) the place where the supply takes place; or

      (b) the grounds surrounding a cafe or public house, or other outlet for the supply; or

      (c) the whole of any enclosed space such as a football ground, garden, showground, amusement park or similar area where there is a clear boundary or limit;

    but does not include any part of a public thoroughfare unless it is an area designated for use in connection with supplies of food from an outlet for the supply of food.

( * Denotes a defined term in the GST Act )

Goods and Services Tax Determination GSTD 2000/4 provides further guidance on the meaning of the word 'premises' in the expression 'a supply of food for consumption on the premises from which it is supplied'.

In particular, paragraph 1 of GSTD 2000/4 provides that food courts, where tables are supplied for customers of food retailers, will satisfy the definition of premises in relation to a supply of food as a place where the supply takes place.

However, Goods and Services Tax Determination GSTD 2000/5 which provides guidance on when a supply of food is 'for consumption on the premises from which it is supplied', states at paragraph 1 that, whether you supply food for consumption on the premises from which it is supplied will depend on the circumstances surrounding the supply.

Paragraph 3 of GSTD 2000/5 deals with situations where the supplier provides food for consumption both on the premises (dine-in) and away from the premises (takeaway). This paragraph provides that if your business operations identify takeaway supplies from dine-in supplies, the takeaway food is not supplied for consumption on the premises. Furthermore, you will be able to identify takeaway food from dine-in food if you:

    ● have separate ordering and/or serving processes for dine-in and takeaway customers (for example dine-in customers may order and receive their meals at their tables or food could be served on a plate or on a returnable tray)

    ● provide different packaging for dine-in and takeaway food (for example, dine-in customers may receive their water or fruit juice in a glass rather than in a sealed disposable container), or

    ● have different menus or product lines for dine-in and takeaway customers.

Paragraph 4 in GSTD 2000/5 provides that if your business operations do not identify takeaway supplies from dine-in supplies, food will remain GST-free if:

      ● it is served in its original or takeaway form (for example, an unprocessed apple or unopened bottle of water), and

      ● it is not served in circumstances indicating that consumption will take place on the premises (for example, the food is not served at a table).

This means that, if it can be reasonably anticipated that a supply of GST-free food will be consumed away from the premises, then it remains GST-free. However, if a supply of GST-free food is served in circumstances indicating that consumption will take place on the premises (for example, customers may receive their meals at their tables or food could be served on a plate or on a returnable tray), then it is subject to GST.

In your case, based on the information provided, you do not make a distinction between dine-in and takeaway supplies as:

      ● the salads are sold in the same type of container (that is, a takeaway container with a lid) to both dine-in and takeaway customers

      ● you do not ask the customer if they will be consuming the salad in the food court or if it will be taken away for consumption

      ● you do not serve the salads in a way that would indicate that consumption would take place on the premises. That is, you do not serve the salads at a table, in alternative containers or on a tray

      ● you do not have different menus or product lines for dine-in or takeaway customers, and

      ● you do not have separate ordering and/or serving processes in place for dine-in or takeaway customers.

Therefore, as the salads are sold in their takeaway form and they are not served in circumstances indicating that consumption will take place in the food court, it can be reasonably anticipated that your supply of the salads is for consumption away from the food court.

Accordingly, your supply of the salads is not excluded from being GST-free under paragraph 38-3(1)(a) of the GST Act.

Hot food for consumption away from those premises

Paragraph 38-3(1)(b) of the GST Act provides that hot food for consumption away from the premises from which it is supplied is not GST-free.

The term ‘hot food’ is not defined in the GST Act. However, the Further Supplementary Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998 ( the EM) at paragraph 1.28 states:

      Hot food means food that has been heated above the room temperature or above the generally surrounding room temperature for consumption. You do not need to check the precise temperature because food or drink that has been heated so that it can be consumed while still hot will be at a higher temperature than the surrounding air temperature.

You have advised that the grilled meat is hot when placed on top of the refrigerated salad ingredients. However, this action will not raise the temperature of the entire salad to above room temperature. Therefore, the salads are not hot food under the definition in paragraph 1.28 of the EM.

Accordingly, your supply of the salads is not excluded from being GST-free under paragraph 38-3(1)(b) of the GST Act.

Food of a kind specified in the table in Schedule 1

Paragraph 38-3(1)(c) of the GST Act provides that food of a kind specified in the third column of the table in Schedule 1, or food that is a combination of one or more foods at least one of which is food of such a kind is not GST-free.

Of particular relevance to your situation 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.

In addition, clause 3 of Schedule 1 provides that Item 4 only applies to food that requires refrigeration or freezing for storage.

The EM provides that the term 'prepared meal' is intended to cover a range of food products that:

      ● directly compete against takeaways 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 dictionary defines 'prepare' in relation to food as 'to get ready for eating, as a meal, by due assembling, and dressing.'

The EM at paragraph 1.33 provides the following examples of prepared meals:

      ● prepared meals, such as curry and rice dishes, mornays and similar dishes sold cold by a takeaway or supermarket that only need reheating to be ready for consumption

      ● fresh or frozen lasagne

      ● sushi

      ● cooked pasta dishes sold complete with sauce

      ● frozen TV dinners, and

      ● fresh or frozen complete meals (e.g. single serves of a roast dinner including vegetables and low fat dietary meals).

All of the above meals, except for the sushi, are of a kind that are duly assembled, cooked or partly cooked and require heating and completion of the cooking process for them to be ready for consumption. Sushi is by its nature ready for consumption when it is duly assembled even though part of it is raw.

Therefore, for food to be regarded as a 'prepared meal' under Item 4, the food needs to be supplied assembled and dressed (if applicable). In addition, if the food is cooked or partly cooked and is to be served hot, it should only need heating, which may include completion of the cooking process, to be ready for consumption. Heating will be interpreted to mean warmed in the microwave oven, convection oven, frying pan, wok or saucepan.

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 your case, you supply salads which you advise are not marketed as a prepared meal.

As the salads are not marketed as a prepared meal, they are not covered by Item 4. Furthermore, your salads are not food of a kind specified in any other item in the table in Schedule 1.

Accordingly, your supply of the salads is not excluded from being GST-free under paragraph 38-3(1)(c) of the GST Act.

Conclusion

As stated above, your salads are not excluded from being GST-free under paragraphs 38-3(1)(a), (b) or (c) of the GST Act.

In addition, the supply of the salads do not fall within any of the other exclusions in section 38-3 of the GST Act.

Accordingly, you are making a GST-free supply under section 38-2 of the GST Act when you sell the takeaway salads.

Combo Meals

When the salad is supplied with a drink in a combo meal, the GST-free status of the salad will remain regardless of whether the drink is also GST-free. If the drink is not GST-free you will be making a supply that comprises both taxable (drink) and GST-free supplies (salad). That is, you are making a mixed supply.

GST is payable on a mixed supply but only to the extent that the supply is taxable. This means that you will need to apportion the consideration for a mixed supply between the taxable and non-taxable (GST-free) parts to find the consideration for the taxable part.

Additional Information

Where you have incorrectly treated a sale as taxable when it should have been GST-free you may be entitled to a refund of the GST overpaid. This refund, however, should not result in you, the supplier, receiving a windfall gain where the economic burden of the cost of the GST has been borne by your customers. Therefore, the Tax Office is not obliged to give a refund unless it is satisfied that you have reimbursed the overpaid GST to your customers and your customers are not registered or required to be registered for GST. You are not legally required to reimburse your customers, but we will not make any refund unless you do.

The only limited circumstance where we may consider refunding without you firstly reimbursing your customers is where you can tangibly and conclusively demonstrate that you have absorbed the cost of the amount incorrectly included as GST in the prices you charged and did not pass it on to the customer. There is an expectation that such instances would be limited to supplies that were made soon after the GST was implemented on 1 July 2000. Before allowing such a refund, the Tax Office will require from the supplier conclusive and tangible proof of its claims.

Generally, you must claim a GST refund or notify us of your entitlement within four years of the end of the tax period to which the entitlement relates