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Ruling

Subject: GST and food products

Question

Is your supply of the deep fried then frozen Product subject to goods and services tax (GST)?

Answer

No.

Relevant facts and circumstances

You are registered for GST.

You sell to third parties a deep fried then frozen product (Product).

The Product has an outer coating of a certain type and a filling at its centre.

The Product is not marketed by you as a prepared meal.

Relevant legislative provisions

All references are to the A New Tax System (Goods and Services Tax) Act 1999:

Section 13-10

Section 38-2

Section 38-3

Section 38-4

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 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.

The definition of food in section 38-4 of the GST Act includes food for human consumption, whether or not requiring processing or treatment. Your Product will be sold in retail outlets as food for human consumption and consequently can be treated as food for human consumption.

Your Product does not fall within any of the exclusions in section 38-3 of the GST Act except possibly paragraph 38-3(1)(c). 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) or is a food that is a combination of one or more foods at least one of which is food of such a kind.

Schedule 1 includes the following food items that may be of relevance when considering the GST treatment of your supply of Product:

· food marketed as a prepared meal (Item 4), and

· bakery products, in particular pastry products covered by Items 22 to 25 of Schedule 1.

Item 4 of Schedule 1

The ATO view on prepared meals is provided by Issue 5 of the Food Issues Register (Issue 5 - available from the ATO website www.ato.gov.au). Issue 5 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 (clause 3 of Schedule 1); and

· are marketed as a prepared meal.

Issue 5 further provides some examples of prepared meals and includes:

· 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 (for example, single serves of a roast dinner including vegetables and low fat dietary meals).

In your case, the Product is not marketed by you as a prepared meal and does not compete against meals supplied by a take-away or restaurant. Given this, Product does not fall within Item 4.

Items 22 to 25 of Schedule 1

Pastry products, such as pies, pasties, sausage rolls, pastries and pastizzi are specifically included in Schedule 1. Clause 2 of Schedule 1 operates to ensure that these items are subject to GST regardless of whether they are supplied hot or cold, or require cooking, heating, thawing or chilling prior to consumption.

There are a number of products that incorporate pastry as their outer layer and are not specifically included in Schedule 1. These products may be subject to GST by virtue of paragraph 38-3(1)(c) of the GST Act which refers to food of a kind specified in the third column of the table in clause 1 of Schedule 1.

Hence, in considering if the Product is a food of a kind, it is relevant to look at the food products listed in Items 22 to 25 of Schedule 1.

The Macquarie Dictionary (5th Edition) defines pastry to be:

1. food made of paste or dough, as the crust of pies, etc.

2. articles of food of which such paste forms an essential part, as pies, tarts, etc.

In the case of the Product, its layer cannot be considered as being a layer equivalent to pastry given the layer is neither a paste nor dough.

Given this, the supply of the Product is not exempted from being a food for human consumption under 38-3 of the GST Act and hence, it is a food as defined by subsection 38-4(1) of the GST Act. Consequently, its supply would be GST-free.

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