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Edited version of private ruling
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Ruling
Subject: GST and banana bread
Question:
Is the supply of your 'banana bread' GST-free?
Advice/Answers:
No. The supply of your 'banana bread' is not GST-free.
Relevant facts:
· You are registered for Goods and Services Tax (GST).
· You run a bakery enterprise.
· You bake a product which you call 'banana bread'.
· In making this product you use fresh bananas, which are added to other ingredients and then baked.
· The type of flour used in baking your banana bread consists of tapioca starch, organic quinoa and rice flour. These ingredients are listed on the packaging of your product.
· The labelling on the packaging of your banana bread states that the product also includes the following foods as ingredients: sugar, fresh eggs, brown sugar, olive oil and baking powder, and that it may contain traces of sesame.
· The labelling on the packaging of your banana bread provides the nutritional breakdown per 100 grams for energy, protein, total and saturated fat, carbohydrate and sodium.
· There are no fillings or glazes applied after baking.
· The labelling on the packaging of your banana bread states that it is yeast-free and dairy-free.
· You have provided a sample loaf of your banana bread for examination.
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 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 paragraph 38-4(1)(a) of the GST Act as 'food for human consumption (whether or not requiring processing or treatment)'.
It is understood that you are supplying your product banana bread as food for human consumption. As such, it falls within the definition of food for GST purposes.
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). Item 20 in Schedule 1 (Item 20) specifies that cakes, slices, cheesecakes, pancakes and waffles are not GST-free.
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) (The Dictionary) 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.
The Dictionary defines bread as 'a food made of flour or meal, milk or water, etc., made into a dough or batter, with or without yeast or the like, and baked'.
The Dictionary defines cake as 'a sweet baked food in loaf or layer form, made with or without shortening, usually with flour, sugar, eggs, flavouring, usually with baking powder or soda, and a liquid'.
From these definitions it is considered that your banana bread is a cake like product. The ingredients for this product are similar to those outlined in the definition of the term 'cake'. From viewing a sample of this product its appearance and texture is also more similar to 'cake' than to 'bread'.
Accordingly, the banana bread products are food of the same class as cake and are therefore considered to be food of a kind specified in Item 20. As such, your supply of banana bread is not GST-free under section 38-2 of the GST Act.
As a consequence, your supplies of banana bread are taxable supplies because you are registered for GST, and you will be supplying your product in Australia for consideration in the course or furtherance of your enterprise.
Further information about GST and food is available on our website www.ato.gov.au , which has a GST food classification decision tool, and links to relevant issues registers and publications.
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