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Edited version of your written advice

Authorisation Number: 1051512914549

Date of advice: 08 May 2019

Ruling

Subject: GST and food sold from vending machine

Question

    Is your supply of the food products (Products) through vending machines located within

    commercial premises a GST-free supply?

Answer

Yes.

This ruling applies from the date of this ruling until a date four years from the date of this ruling.

Relevant facts and circumstances

You are registered for GST.

You purchased the Products with GST-free status and supply the Products from vending machines, which are all located in secure commercial premises and are not accessible to the general public. No table services are provided to the consumers and there is no expectation that the Products are to be consumed on any premises. All Products are sold in their original packaging.

The following are the labelling of the Products, which provides Product Information…

You state that nuts and seeds in the Products have not been processed or treated by salting, spicing, smoking or roasting, or in any other similar way.

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 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 paragraph 38-4(1)(a)

A New Tax System (Goods and Services Tax) Act 1999 Schedule 1 clause 1 table

items 15, 16 and 18.

Reasons for decision

Summary

Your supply of the Products from the vending machines is a GST-free supply. The Products come within the definition of food for human consumption in section 38-4 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). The Products do not fall within any item of Schedule 1 of the GST Act. Hence, the supply is not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. Further the supply is not excluded from being GST-free by paragraph 38-3(1)(a) of the GST Act (food for consumption on the premises from which it is supplied).

Detailed reasoning

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 to include food for human consumption (whether or not requiring processing or treatment)(paragraph 38-4(1)(a) of the GST Act).

The Products come within the meaning of food contained in paragraph 38-4(1)(a) of the GST Act.

However, 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 that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Items 15, 16 and 18 of Schedule 1 are relevant here.

Paragraph 38-3(1)(c) of the GST Act

Items 15, Item 16 and Item 18 of Schedule 1 (item 15, item 16 and item 18)

Item 15: “potato crisps, sticks or straws, corn crisps or chips, bacon or pork crackling or prawn chips”

Item 16: ”Seeds or nuts that have been processed or treated by salting, spicing, smoking, or roasting, or in any other similar way”

Item 18:” food similar to that covered by item 15 or 16, whether or not it consists wholly or partly of any vegetable, herb, fruit, meat, seafood or dairy product or extract and whether or not it is artificially flavoured

Products 1 and 2:

You state that the nuts and seeds have not been processed or treated by salting, spicing, smoking or roasting, or in any other similar way.

The Detailed Food List, which is available on our website, states as follows:

    nuts (raw, shelled or unshelled)

    GST-free

    Food for human consumption that is not of a kind specified in Schedule 1 of the GST Act.

    nuts (salted, spiced, smoked, roasted, seasoned or otherwise flavoured)

    Taxable

    Schedule 1, item 16 of the GST Act applies

Therefore, items 16 and 18 will not apply to the Products 1 and 2, and they are not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

Products 3, 4 and 5

Biltong and Beef jerky Products:

The Detailed Food List on ATO website states as follows:

Beef Jerky and Biltong:

beef jerky/biltong

    GST-free

    Food for human consumption that is not of kind specified in Schedule 1 of the GST Act (refer ATO ID 2002/298 and ATO ID 2002/299).

Beef jerky is similar to Biltong. ATO ID 2002/298 states:

    Biltong is a dried, flavoured meat product that requires no refrigeration. It is made from uncooked lean meat that is dried in the open air to varying degrees.

    Traditional biltong is dry and hard. It is sold in strips, pieces and slices. It is a source of high protein that is eaten on its own (often by bushwalkers) but can also be used in salads, sandwiches, as an ingredient for savoury baked goods, quiches and omelettes or reconstituted for use in stews and soups

Biltong can also be semi-dried and soft. The semi-dried, soft biltong is used in the same manner as other cooked, pickled, or smoked smallgoods.

ATO ID 2002/299 states that,’Semi-dried, soft biltong is not food of a kind listed in Schedule 1. As such, the semi-dried, soft biltong is not excluded from being a GST-free supply of food under paragraph 38-3(1)(c) of the GST Act.’

Biltong in dry, hardened form:

ATO ID 2002/298 states:

    Of relevance to the classification of dry, hardened biltong, is item 18 of Schedule 1 (Item 18). Item 18 specifies that food similar to that covered by items 15 or 16 of Schedule 1, whether or not consisting wholly or partly of any vegetable, herb, fruit, meat, seafood or dairy product or extract and whether or not it is artificially flavoured, is not GST-free.

    Item 16 of Schedule 1 lists seeds or nuts that have been processed or treated by salting, spicing, smoking, or roasting, or in any other similar way and therefore, is not relevant to the classification of biltong.

    However, item 15 of Schedule 1 (Item 15) lists potato crisps, sticks or straws, corn crisps or chips, bacon or pork crackling or prawn chips. Therefore, although biltong in its dry, hardened form is not covered by any of the foods listed in Item 15, it must be determined whether it is food similar to that covered by Item 15.

    All of the foods listed in Item 15 are generally cooked. The biltong is uncooked and although dry and hardened, is not similar in appearance or composition to a crisp, stick, straw or chip. Although the biltong is often eaten as a snack food in the same way that the crisps, sticks, straws and chips listed in Item 15 are, unlike those products, biltong has many other food uses as an ingredient for baking, sandwiches, salads, stews etc. Therefore, the biltong is not considered to be food similar to that covered by Item 15.

    As such, the dry and hardened biltong is not excluded from being a GST-free supply of food under paragraph 38-3(1)(c) of the GST Act. In addition, as the supply does not fall within any of the other exclusions in section 38-3 of the GST Act, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies the dry and hardened biltong.

Therefore, items 15 and 18 will not apply to the Products 3, 4 and 5, and they are not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

In summary, the Products are not excluded from being a GST-free supply of food under paragraph 38-3(1)(c) of the GST Act. The next step is to consider paragraph 38-3(1)(a) of the GST Act.

Paragraph 38-3(1)(a) of the GST Act- food for consumption on the premises from which it is supplied

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

In the Fact sheet for small business, GST and Food, there are examples provided as follows:

https://www.ato.gov.au/assets/0/104/300/362/47741fd2-9253-41aa-94f0-54322a55009a.pdf

    Anh’s bakery

    Anh sells bread and plain bread rolls at her bakery. These are without icing or fillings. She sells the bread to her customers with the intent that they will eat it elsewhere.

    She doesn’t need to charge her customers GST.

    Iman’s restaurant

    Iman sells plain bread rolls at his restaurant. These are served in the restaurant and intended to be eaten at the restaurant.

    Iman charges GST to his customers and he pays this GST to the ATO.

Goods and Services Tax Determination (GSTD) 2000/5 explains the Tax Office's view on when a supply of food is for consumption on the premises from which it is supplied. Paragraphs 4 to 12 of GSTD 2000/5 state:

https://www.ato.gov.au/law/view/document?docid=GSD/GSTD20005/NAT/ATO/00001

    4. 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)

    Example 1

    5. Greg operates a roadhouse. The roadhouse supplies food which is taken away and consumed off premises whilst food is also provided to eat in a diner which is part of the premises. Orders are made at the same counter for food taken away and for food consumed in the diner.

    6. It is Greg's practice to ask customers whether they want to eat in the diner or take food away. Customers who eat in the diner are given a table number and sit themselves at the table. Customers taking food away wait at the counter.

    7. Different packaging is used. Meals in the diner are served on a plate. Cold beverages provided in the diner are served in a glass. Meals taken away are wrapped in paper or cardboard. Cold beverages taken away are either supplied in disposable cups or in the original packaging.

    8. Greg's business operations allow him to separately identify food for consumption both on the premises and away from the premises.

    Example 2

    9. Heather has a snack bar in a food court. All of the water that she sells to customers, whether they drink it in the food court or take it away, is in its sealed bottled form. It is not Heather's practice to ask customers who purchase food or drink if they wish to consume it in the food court or take it away.

    10. The bottled water is not served at a table and it is not served in circumstances indicating that consumption will take place on the premises (for example, accompanying a meal on a returnable tray). We will accept that the water is not supplied for consumption on the premises.

    Example 3

    11. The facts are the same as in example 2 except that Heather asks her customers if they wish to consume their food or drink in the food court or take it away - as she uses different packaging for dine-in and takeaway supplies.

    12. For those customers who indicate that they will dine in the food court, supplies of food and drink, including whole fruit and bottled water which would otherwise be GST-free, are for consumption on the premises and will be taxable. For those customers who indicate that they will take the food or drink away, supplies that are otherwise GST-free are not for consumption on the premises and will remain GST-free.

GSTD 2000/4 Goods and Services Tax: what does the word 'premises' mean in the expression, 'a supply of food for consumption on the premises from which it is supplied' states:

https://www.ato.gov.au/law/view/document?locid=GSD/GSTD20004/NAT/ATO

    1. The ordinary meaning of the word 'premises' is widened by the definition in section 38-5 of the A New Tax System (Goods and Services Tax) Act 1999. Premises falling within the section 38-5 definition include:

      ·the place where the supply takes place - for example, supermarkets, restaurants, cafes, snack bars, hotels, motels, bed and breakfasts, clubs, reception lounges, aircraft, boats, trains, venues for catered functions, or food courts where tables are supplied for customers of food retailers;

      ·the grounds surrounding restaurants, cafes, snack bars, hotels, clubs, reception lounges and venues for catered functions; and

      ·any venues, associated with leisure, sport or entertainment, with clear boundaries or limits.

    2. However, premises do not include public thoroughfares unless an area has been designated for use in connection with the food supply outlet.

    3. The following venues associated with leisure, sport or entertainment fit within the definition of 'premises' in the context of 'a supply of food for consumption on the premises from which it is supplied':

        ● football grounds

        ● exhibition halls

        ● other sports grounds

        ● theme parks

        ● golf courses

        ● showgrounds

        ● gyms

        ● aquariums

        ● ice-skating rinks

        ● galleries

        ● motor racing circuits

        ● gardens

        ● racecourses

        ● museums

        ● swimming pools

        ● zoos

        ● tennis centres

        ● cinemas

        ● ten pin bowling alleys

        ● concert halls

        ● air-show venues

        ● entertainment centres

        ● amusement parks/arcades

        ● theatres.

    4. The above venues may be used for other purposes - for example, business or trade conventions. However, the manner in which a venue is used will not affect its status as 'premises'. If used for other purposes, the above venues are still considered to be 'premises'.

    5. With some venues it is important to determine what are the relevant premises. Some suppliers' premises sit within larger general purpose sites. As long as the larger sites are not venues associated with leisure, sport or entertainment, it is only the suppliers' premises that are relevant. At the following venues, the relevant premises are limited to the food supply outlet (together with any associated surrounding areas connected with the outlet):

        ● kiosks or similar stores located within caravan parks, camping grounds, or hotel/resort complexes - the 'premises' is the kiosk and not the caravan park, camping ground or hotel/resort complex;

        ● school tuckshops - the 'premises' is the tuckshop and not the school;

        ● canteens and dining areas in hospitals, offices, factories, university halls of residence or colleges - the 'premises' is the canteen or dining area and not the hospital, office, factory, university hall of residence or college;

        ● cafes in shopping centres, universities, airports, bus depots or railway stations - the 'premises' is the cafe and not the shopping centre, university, airport, bus depot or railway station.

6……….

    Example 4

    10. Andy sells cold drinks, including bottled water and fruit juice, from a portable cooler at a football game. The football ground is an enclosed sporting venue so the whole football ground is the premises at which food is supplied for consumption on the premises.

    Example 5

    11. Sue operates a kiosk which is located within a swimming pool complex. The swimming pool complex is situated within a public park. Although the kiosk sells mainly to pool customers, there is also a window which faces out onto the park. It is the swimming pool complex that is the relevant premises. Food supplied and eaten inside the pool complex is supplied for consumption on the premises. The public park is a public thoroughfare and does not form part of the premises. Food sold through the window to customers in the park is not supplied for consumption on the premises.

    Example 6

    12. Nick has a magnificent flower garden on his land. Nick's garden wins awards and at certain times of the year Nick allows visitors to access his garden. Nick sells refreshments at these times. The garden is a leisure venue with a clear boundary and is premises at which food is supplied for

    consumption on the premises.

    Example 7

    13. The Briscoast State School P & C Association runs a tuckshop at the school. The tuckshop does not have a designated seating area for the consumption of food. Neither the tuckshop nor the school grounds are premises at which food is supplied for consumption on the premises

In relation to your supply:

You state that you supply the Products from vending machines, which are all located in secure commercial premises. The vending machines are not accessible to the general public. No table services are provided to the consumers and there is no expectation that the Products are to be consumed on any premises. All Products are sold in their original packaging.

Since the place where the vending machines are situated, are not venues associated with leisure, sport or entertainment, it is only the suppliers' premises that are relevant.

You state that you do not have a designated seating area for the consumption of food sold from the vending machines located inside the commercial premises. Hence the food sold from the vending machines are not food supplied for consumption on the premises.

Conclusion:

Your supply of the Products is a GST-free supply. The Products come within the definition of food for human consumption in section 38-4 of the GST Act. The Products do not fall within any item of Schedule 1 of the GST Act. Hence, the supply is not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. Further the supply is not excluded from being GST-free by paragraph 38-3(1)(a) of the GST Act (food for consumption on the premises from which it is supplied).