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Edited version of private ruling
Authorisation Number: 1011833616851
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Ruling
Subject: GST classification of a food item
Question 1
Is your supply of the product GST-free?
Answer: No
Facts
You are registered for goods and services tax (GST).
You carry on an enterprise of baking/retailing food.
Your signature product is a bun consisting of a sweet coating with a butter filling. (Bun)
The ingredients, the dough and topping are imported in a frozen state by a related entity and are ready to be cooked (i.e. they already cut to the appropriate size and shape).
The Bun is cooked by allowing the dough and topping to defrost. Topping is then poured or spread on top of the dough and then the product is baked.
Reasons for decision
Summary
The supply of the Bun is subject to GST (regardless if is eaten away from the premises or is supplied in house). While it is food for human consumption, it is excluded from being GST-free by an item of Schedule 1 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
Detailed reasoning
Subsection 7-1(1) of the GST Act provides that GST is payable on any taxable supplies.
Section 9-5 of the GST Act provides that you make a taxable supply if:
(a) you make the supply for consideration
(b) the supply is made in the course or furtherance of an *enterprise that you carry on
(c) the supply is connected with Australia, and
(d) you are registered, or required to be registered.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
For the supply of your Bun to be a taxable supply, all of the requirements listed in section 9-5 of the GST Act must be satisfied.
Based on the information provided, you have satisfied the requirements in paragraphs 9-5(a) to 9-5(d) of the GST Act as follows:
· the supply of the Bun is for consideration
· the supply of the Bun is made in the course of the business that you carry on
· the supply is connected with Australia as your business is located in Australia, and
· you are registered for GST.
Therefore, the supply of the Bun will be taxable to the extent that it is not input taxed or GST-free.
There is no provision in the GST Act for the supply of a bakery product to be input taxed other than section 40-130 of the GST Act which allows a non profit body to elect to treat its supplies of food made at certain school tuckshops and canteens as being input taxed. As this exception does not apply to you, then what remains to be considered is whether the supply of the bun is GST-free.
A supply of food is GST-free in accordance with section 38-2 of the GST Act, if it satisfies the definition of food in section 38-4 of the GST Act and it does not come within any of the exclusions in section 38-3 of the GST Act.
'Food' is defined in paragraph 38-4(1)(a) of the GST Act to include 'food for human consumption (whether or not requiring processing or treatment)'. The Bun is food for human consumption and therefore satisfies the definition of food in paragraph 38-4(1)(a) of the GST Act.
However, under paragraph 38-3(1)(c) of the GST Act, a supply of food will not be GST-free if it is food of a kind that is specified in the third column of the table in clause 1 of Schedule 1 to the GST Act (Schedule 1), or food that is a combination of one or more foods at least one of which is food of such a kind. Accordingly it is necessary to establish if either product is covered by Schedule 1.
Schedule 1 covers six broad categories for food namely, prepared food, confectionery, savoury snacks, bakery products, ice-cream food and biscuits goods. Given the nature of the food item, the only category to consider is bakery products where item 27 in particular is of most relevance covering bread (including buns) that has a sweet filling or coating.
While it is debatable whether the Bun's filling could be considered to be a sweet filling, the Bun does have a sweet coating and therefore, is covered by item 27 of Schedule 1. In which case, it is excluded from being GST-free under section 38-2 of the GST Act.
It is noted that buns eaten at the premises on which they are supplied are also excluded from being GST free by the operation of paragraph 38-3(1)(a) of the GST Act.
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