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Ruling

Subject: GST and dessert

Question 1

Is the supply of your dessert a GST-free supply pursuant to section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No.

Relevant facts and circumstances

You are registered for goods and services tax (GST).

You are a food manufacturing and distribution company.

You are introducing a new product shelf stable dessert (dessert) in different flavours.

The dessert will be supplied to supermarkets in a shelf stable state and will be displayed on the supermarket shelf.

The dessert is not sold frozen and is not found in the freezer section of the supermarket.

The dessert is best consumed in a frozen state and the product will be marketed to consumers as "ready to freeze". The packaging recommends that the consumer freeze the product prior to consumption.

Each packaging of the dessert consists of a packed sleeve.

The dessert's listed ingredients for the various flavours contain less than 15% fruit juices or puree fruits, together with syrups and flavours to give it a fruity taste. They do not consist of any cream or milk

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 Section 38-3

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 Paragraph 38-3(1)(d)

A New Tax System (Goods and Services Tax) Act 1999 Section 38-4

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

Reasons for decision

Section 38-2 of the GST Act provides that a supply of food is GST-free. The meaning of the term 'food' for GST purposes is defined in section 38-4 of the GST Act, and under this definition the term 'food' includes food for human consumption, whether or not it requires processing or treatment. The desert meets the definition of 'food' as it is marketed as a dessert.

Under section 38-3 of the GST Act, the supply of certain foods is excluded from being GST-free.

Paragraph 38-3(1)(c) of the GST Act provides that food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1) are not GST-free. Schedule 1 includes the category 'Ice-cream food' which consists of items 28 to 31.

28

Ice-cream food

ice-cream, ice-cream cakes, ice-creams and ice-cream substitutes

29

 

frozen confectionery, frozen yoghurt and frozen fruit products (but not frozen whole fruit)

30

 

flavoured iceblocks (whether or not marketed in a frozen state)

31

 

any *food similar to food listed in items 28 to 30

Item 28

This item operates to tax 'ice-cream, ice-cream cakes, ice-creams and and ice-cream substitutes. The term ice-cream is not defined in the GST Act.

The Macquarie Dictionary defines ice-cream as "frozen food made of cream or milk, sweetened and unflavoured".

Based upon the ingredients of the dessert, Item 28 does not apply to this product as they are not frozen food made of cream or milk.

Item 29

This item operates to tax "frozen confectionary, frozen yoghurt, and frozen fruit products (but not frozen whole fruit)". We note that this item only applies to frozen products.

Your desert is not intended to be eaten in its current state. Instead, it must be further processed by way of freezing to become an edible frozen fruit product in the manner envisaged by its suppliers.

In this case as the desert is not supplied in a frozen state, therefore it is not taxable pursuant to item 29 in the Schedule.

Item 30

This item operates to tax "flavoured iceblocks (whether or not they are marketed in a frozen state)".

The term 'flavoured iceblock' is not defined in the GST Act. The Macquarie Dictionary defines 'flavour' as:

The Macquarie Dictionary defines 'iceblock" as a "frozen flavoured confectionary, sometimes on a stick".

The dessert is flavoured as it contains 15% (or less) of fruit juices or puree fruits, together with syrups and flavours to give it a fruity taste.

The packaging indicates the dessert is shelf stable and is displayed on the supermarket shelf. However, the packaging also recommends that the dessert should be frozen before consumption, indicating that it is consumed like a fruit flavoured ice block which indicates the supplier's intention.

The fact that the dessert is shelf stable and not supplied as iceblock does not distract it from being a food falling under item 30 of Schedule 1. Item 30 of Schedule 1 list flavoured iceblocks whether or not they are marketed in a frozen state. The manufacturer's intention is for the dessert to be consumed in frozen state, similar to other desserts under the ice cream category.

In addition the dessert is packed in a sleeve which is similar to that of traditional flavoured ice-blocks which are sold in the market.

Item 31

This item operates to tax any food similar to food listed in items 28 - 30.

As we have already discussed that the dessert is similar to an iceblock under item 30, then we find that the product is taxable under item 31 of Schedule 1 of the GST Act.

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