ATO Interpretative Decision

ATO ID 2002/117

Goods and Services Tax

• This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies rugelach?

Decision

No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies rugelach. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts

The entity is a food supplier. The entity supplies uncooked frozen rugelach.

Rugelach is a sweet, crescent shaped pastry, with dates and cocoa spread between its pastry layers.

The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.

Reasons for Decision

A supply of food is GST-free under section 38-2 of the GST Act provided that it does not come within any of the exclusions listed in section 38-3 of the GST Act.

Food is defined in section 38-4 of the GST Act to include food for human consumption (paragraph 38-4(1)(a) of the GST Act). Rugelach is food for human consumption and, therefore, satisfies the definition of food 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 specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1).

Of most relevance to this case is item 23 of Schedule 1 (item 23), which provides that 'tarts and pastries' are not GST-free. Therefore, it must be determined whether rugelach is a kind of tart or pastry.

The phrase 'of a kind' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that term. The Macquarie Dictionary (1997) does not define the entire phrase 'of a kind' however, it defines the word 'kind' to mean:

'1. A class or group of individuals of the same nature or character, especially a natural group of animals or plants. 2. Nature or character as determining likeness or difference between things: things differing in degree rather than in kind. 3. A person or thing as being of a particular character or class: he is a strange king of hero. 4 ...'

Accordingly, something will be 'of a kind' if it is of the same nature or character (possessing the same distinguishing qualities) as the thing or group in question.

Rugelach is a sweet crescent shaped pastry product with cocoa and dates spread between its pastry layers. Therefore, the rugelach is considered to be 'food of a kind' covered by Item 23.

Clause 2 of Schedule 1 of the GST Act (Clause 2) operates to ensure that food listed in Item 23 is subject to GST regardless of whether it is supplied hot or cold, or requires cooking, heating, thawing or chilling prior to consumption.

Therefore, although the rugelach is raw and frozen, it is still a food of a kind listed in Schedule 1. Thus, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies rugelach.

The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies rugelach.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   Division 38
   section 38-2
   section 38-3
   paragraph 38-3(1)(c)
   section 38-4
   paragraph 38-4(1)(a)
   Division 40
   Schedule 1 clause 1
   Schedule 1 clause 1 table item 23
   Schedule 1 clause 2

Keywords
Goods & services tax
GST free
GST food
Food for human consumption
GST supplies & acquisitions
Taxable supply

Business Line:  GST

Date of publication:  31 January 2002

ISSN: 1445-2782