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Authorisation Number: 1051310113748

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Date of advice: 27 November 2017

Ruling

Subject: GST and food

Question

Is the sale by the takeaway of coleslaw and potato salad a GST-free supply?

Answer

Yes, the sale of coleslaw and potato salad is a GST-free supply when they are sold for takeaway.

Facts

You are a takeaway business which is registered for goods and services tax (GST).

There are tables and chairs at the premises but they are for the customers to wait until their order is ready. No one consumes any food at the premises, and no food is served on plates at the tables.

You sell potato salad and coleslaw. Customers choose the type of salad and the size they want, and the staff packs it up for them. The salads are always in plastic boxes and cutlery is provided to the customers when they purchase the salads.

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.

A New Tax System (Goods and Services Tax) Act 1999 Schedule 1 clause 1 table item 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). The salads are 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.

However, subsection 38-3(1) of the GST Act explains which food is not GST-free:

    (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 if 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.

You advised that this is a takeaway shop and no food is consumed on the premises. Further, the food is neither hot food nor 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) of the GST Act do not apply.

However, under paragraph 38-3(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 (Schedule 1). Of specific relevance is item 4 of Schedule, which provides that food marketed as a prepared meal (but not including soup) is not GST-free.

The GST food guide and GST food index available on the Tax Office website at www.ato.gov.au states that salad (green, rice, pasta, coleslaw) not marketed as a prepared meal is GST-free.

Issue 5 in the ‘Food Industry Partnership - Issues Register’ deals with the term ‘prepared meal’:

    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;

    ● sushi;

    ● cooked pasta dishes sold complete with sauce;

    ● frozen TV dinners; and

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

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. Although the salads require refrigeration and are duly assembled, dressed and ready for consumption they are not similar to the examples listed above. Therefore, the supply of the coleslaw and potato salad is GST-free.