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Edited version of your written advice

Authorisation Number: 1051309502511

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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

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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 1

Are you making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when you supply hot takeaway soup?

Answer

No, you are not making a GST-free supply when you supply hot takeaway soup. The supply is a taxable supply.

Question 2

Are you making a GST-free supply under section 38-2 of the GST Act, when you supply takeaway salads?

Answer

Yes, you are making a GST-free supply when you supply takeaway salads.

Relevant facts and circumstances

    ● You own a business that is operated in Australia.

    ● You mainly sell sandwiches, rolls, wraps and salads.

    ● You also sell hot soup products.

    ● The salads are sold in take away plastic containers, sandwiches are wrapped in grease proof paper and soup is sold in a cardboard ripple cup, all without labelling.

    ● You operate on a 90% take away basis but have table and chairs available should customers wish to sit down to consume their meal. Food is not served at the tables.

    ● You advise that you are registered for goods and services tax (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

GST is payable on taxable supplies. Section 9-5 of the GST Act states:

    You make a taxable supply if:

    (a) you make the supply for *consideration; and

    (b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and

    (c) the supply is *connected with Australia; and

    (d) you are *registered, or *required to be registered.

    However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

(* Denotes a defined term in section 195 -1 of the GST Act.)

In your case, the supply of your products meets the criteria of paragraphs 9-5(a) to 9-5(d) of the GST Act. That is, you make supplies of your products for consideration, the supplies are made in the course or furtherance of an enterprise that you carry on, the supplies are connected with Australia and you are registered for GST.

There are no provisions in the GST Act that would make the supplies of your products input taxed. Therefore, it remains to be determined whether the supplies of your products for consumption away from the premises will be GST-free under Division 38 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 by section 38-3 of the GST Act.

Food is defined in section 38-4 of the GST Act and includes food for human consumption (whether or not requiring processing or treatment).

Hot soup and salads are food for human consumption and, therefore, satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act. As hot soup and salad are food for human consumption, it needs to be determined if they are excluded by one of the paragraphs listed in section 38-3 of the GST Act and, if excluded, their supply is not GST free.

Subsection 38-3(1) of the GST Act explains which food is not GST-free and states:

    A supply is not GST free under section 38-2 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 I a combination of one or more foods at least on 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.

Soup

The soups are supplied in takeaway cardboard ripple cups without labelling and are not sold for consumption on the premises from which it is supplied although customers may sit down at a table should they wish. Soup is not listed as a beverage or food of a kind specified in regulations made for the purpose of subsection 38-3(1) of the GST Act, as such it is only necessary to consider paragraphs 38-3(1)(b), 38-3(1)(c) and 38-3(1)(d) of the GST Act.

Paragraph 38-3(1)(b) of the GST Act provides that a supply of hot food for consumption away from premises from which it is supplied is not GST-free. Hot food is not defined in the GST Act. The Further Supplementary Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998, at paragraph 1.25, provides that hot food includes, among other things, soup. Hot food is taken to mean food that at the time of supply is heated for the purpose of being consumed hot when it is supplied. Hot soup is considered to be within the meaning of hot food.

As your soups are supplied hot for consumption away from your premises, they fall under paragraph 38-3(1)(b) of the GST Act. Consequently, you are not making a GST-free supply of food when supplying your hot soup for consumption away from your premises. As the supply is not GST free and you otherwise satisfy all the requirements of section 9-5 of the GST Act, you are making a taxable supply.

Salads

Your salads are sold in take away plastic containers without labelling. The salads are not sold for consumption on the premises from which it is supplied although customers may sit down at a table should they wish. Salads are not a hot food, or a beverage and are not of a kind specified in regulations made for the purpose of subsection 38-3(1) of the GST Act and, as such, it is only necessary to consider if paragraph 38-3(1)(c) of the GST Act applies.

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 third column in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Of specific relevance to salads is item 4 of Schedule 1 (Item 4), which provides that food of a kind marketed as a prepared meal is not GST-free.

The term ‘prepared meal’ is not defined in the GST Act and, therefore, bears its ordinary meaning.

The Macquarie Dictionary (3rd edn) (the dictionary) defines the term 'meal' as '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, dressing or cooking'. Therefore, for food to be regarded as a 'prepared meal' under Item 4, the food needs to be assembled, dressed, cooked or partly cooked.

Your salads are not of a kind marketed as a ‘prepared meal’. Therefore, your salads are not food of a kind specified in Item 4 and, as such, are not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. In addition, your supply of salads does not fall within any of the other exclusions in section 38-3 of the GST Act. As such, you are making a GST-free supply of food under section 38-2 of the GST Act when supplying salads for consumption away from your premises.

Additional information

Where non-taxable supplies that incorrectly include GST in the price are made to the general public, the Tax Office will not generally give a refund of the GST incorrectly included in the price of the supplies unless it is satisfied that the supplier has reimbursed the overpaid GST to the recipients, and the recipients are not registered or required to be registered for GST.