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Date of advice: 27 November 2017
Subject: GST and food
Is the sale of takeaway coleslaw, potato salad and seafood salad by you a GST-free supply?
Relevant facts and circumstances
● You are a partnership registered for goods and services tax.
● You carry on an enterprise of a takeaway food business.
● As part of your business you prepare coleslaw, potato salad and seafood salad on site and sell to the public as takeaway salads.
● The salads are not hot food.
● The takeaway salads are assembled, dressed, ready to eat and supplied to the public in plastic containers to takeaway from the premises.
● The salads are not frozen but are kept refrigerated.
● None of the takeaway salads are marketed as prepared meals.
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
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 is not excluded from being GST-free under 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).
In your case, the salads you supply are food for human consumption. Therefore, the prepared salads fall within the meaning of food in section 38-4 of the GST Act as food for human consumption and, as such, are GST-free.
However, subsection 38-3(1) of the GST Act explains which food is not GST-free and states:
(1) 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 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.
(* denotes a term defined in the GST Act)
You advised that the salads are to takeaway from the premises. Further, the food is neither hot food nor a beverage and it is not specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). Therefore, paragraphs 38-3(1)(a), (b), (d) and (e) do not apply.
However, under paragraph 38-1(c) of the GST Act, 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. Of specific relevance is item 4 of the table, which provides that food marketed as a prepared meal (but not including soup) is not GST-free.
The GST Detailed Food List available on the Tax Office website states that salad (e.g. green, rice, pasta, coleslaw) not marketed as a prepared meal is GST-free.
For further clarification, Issue 5 of the Food Industry Partnership – Issues Register, discusses the issue of what is considered a prepared meal for GST purposes.
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, 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".
The EM at paragraph 1.33 provides examples of prepared meals:
● prepared meals, such as curry and rice dishes, mornays and similar dishes sold cold by a take-away or supermarket that only need reheating to be ready for consumption;
● fresh or frozen lasagne;
● cooked pasta dishes sold complete with sauce;
● frozen TV dinners; and
● fresh or frozen complete meals (for example,. 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" in accordance with 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.
Therefore, for food to be regarded as a prepared meal under item 4 of Schedule 1, the food needs to be assembled, dressed, cooked or partly cooked.
In your case, although the coleslaw, potato salad and seafood salad require refrigeration and are duly assembled, dressed and ready for consumption they are not similar to the examples listed above. Further, the takeaway salads are not marketed as a prepared meal.
Therefore, the salads you provide as takeaway salads do not come within the range of the exclusions mentioned in section 38-3 of the GST Act.
Accordingly, when you supply takeaway coleslaw, potato salad and seafood salad you are making a GST-free supply under section 38-2 of the GST Act.