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Ruling

Subject: Food

Question

Is the supply of the following food products GST-free?

Meat curry without rice

Meat curry with rice/vegetables

Cooked rice

Vegetables

Fried rice

Decision

Relevant facts:

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

You carry on an enterprise of food supplier.

You supply the following food

· meat curry without rice

· meat curry with rice/vegetables

· cooked rice

· vegetables

· fried rice- contains rice fried with meat and vegetables

The food requires refrigeration for storage.

Reasons for decision

Food is defined in section 38-4 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). Under section 38-2 of the GST Act a supply of food is GST-free. However, food that is described in section 38-3 of the GST Act is not a GST-free.

The term food is defined in section 38-4 of the GST Act and includes amongst other things any of the following or any combination of the following:

· food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act)

· ingredients for food for human consumption (paragraph 38-4(1)(b) of the GST Act) and

· goods to be mixed with or added to food for human consumption (including condiments, spices, seasoning, sweetening agents or flavourings) (paragraph 38-4(1)(e) of the GST Act).

In this case your food products satisfy the meaning of food under section 38-4 of the GST Act as they are sold as food for human consumption. Next we need to consider whether the food products are the type of food described in subsection 38-3(1) of the GST Act.

Subsection 38-3(1) of the GST Act provides that a supply of food is not GST-free if it is a supply of, amongst other things:

· food for consumption on the premises from which it is supplied, or

· hot food for consumption away from those premises, or

· food of a kind specified in Schedule 1 of the GST Act, or

· food that is a combination of one or more foods at least one of which is food of such a kind

Based on the information provided, your food products are not for consumption on the premises from which they are supplied. They are not sold as hot food for consumption away from those premises.

Next we need to determine whether your food products are food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Food listed under an item in Schedule 1 is not a GST-free food under section 38-3 of the GST Act.

Items 1 to 7 in Schedule 1 relate to prepared food and are intended to cover food that directly compete against take-away and restaurant meals. We consider item 4 of Schedule 1 (Item 4) to be relevant to your food products. Item 4 is about food marketed as a prepared meal, but not including soup.

When considering food under Item 4 we need to consider conditions outlined in clauses 2 and 3 of Schedule 1 of the GST Act. Clause 2 of Schedule 1 of the GST Act provides when considering prepared food under items 1 to 7, it does not matter whether the food is sold hot, cold or frozen or require cooking, heating, thawing or chilling prior to consumption. Clause 3 of Schedule 1 of the GST Act provides that Item 4 only applies to food that requires refrigeration or freezing for its storage.

Prepared Meals

The term 'prepared meal 'referred to in Item 4 is not defined in the GST Act and therefore takes its ordinary meaning.

'Meal' is defined in The Macquarie Concise Dictionary, 2001, revised 3^rd edition Macquarie Library Pty Ltd NSW (Macquarie Dictionary) as:

· one of the regular repasts of the day, as breakfast, lunch, or dinner.

· the food eaten or served for a repast.

This definition could be applied to a single food item or to a meal consisting of several food items.

The Macquarie Dictionary defines 'prepare' in relation to food as "to get ready for eating, as a meal, by due assembling, dressing or cooking".

The Further Supplementary Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998 (the EM) provides that the term 'prepared meal' is intended to cover a range of food products that:

· directly compete with take-aways and restaurants

· require refrigeration or freezing for storage and

· are marketed as a 'prepared meal'.

Included in this category (according to the EM at paragraph 1.33) are things such as:

· prepared meals such as curry and rice dishes, mornay's 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 dinned including vegetables and low fat dietary meals).

Paragraph 1.34 of the EM provides examples of food items that are not considered to be prepared meals:

· frozen vegetables

· uncooked pasta products

· fish fingers

· baby food, baked bens, spaghetti and Irish stew that do not require refrigeration or freezing.

In determining whether food is marketed as a 'prepared meal' the activities of the seller are relevant. Consideration is given to the following:

· the name of the goods

· the price of the goods

· the labelling on any containers for the goods

· literature or instructions packed with the goods

· how the goods are packaged

· how the goods are promoted or advertised and

· how the goods are distributed.

The Australian Taxation Office's (ATO) view on prepared meal is outlined in the ruling Goods and Services Tax Industry Issue - Food and Industry Partnership - Prepared Food. There is more information in the ruling Goods and Services Tax Industry Issue - Food and Industry Partnership - Detailed Food Lists (Detailed Food Lists). You may download these rulings from the ATO websites www.ato.gov.au.

Below is an extract from the Detailed Food Lists ruling and it outlines the GST status of meals. It explains the meaning on "prepared meal" where item 4 will apply.

Food products covered under item 4

Item 4 will apply to food products such as curry and rice, meat/seafood in sauce with pasta/vegetables or meals that include meat and vegetables. The food products are usually packaged in a container from which they can be eaten.

In your case, we consider item 4 will apply to the food products such as meat with rice/vegetables as the meals contains meat curry with rice or vegetables in a package. The food requires refrigeration for storage and the consumer cooks or heat up the product before consumption.

Item 4 will also apply to the fried rice as the fried rice requires refrigeration for storage and it is marketed as a prepared meal. The fried rice contains rice fried with meat and vegetables.

As these food products are covered by item 4, they are prepared meals and therefore excluded from being GST-free by section 38-3 of the GST Act.

Food products not covered under item 4

Item 4 does not apply to food products such as a curry or casserole with rice in individual packages that are heated separately and combined before consumption. These food products contain meat or seafood in sauce with serving suggestions to add rice, pasta and/or vegetables before consumption. The consumer has to cook and add rice, pasta and/or vegetables to complete the meal. The meals are not packaged in a container and the components need to be assembled prior to consumption.

In your case we consider the following to be food products not covered by item 4:

· meat curry (without rice)

· cooked rice

· vegetables

The meat curry (without rice) contains meat in curry sauce. The food is supplied without rice or other accompaniments. They are not considered to be prepared meals as the consumer has to add rice or other accompaniment before consumption.

The cooked rice and vegetables are not a meal on their own and they are consumed with other food.

These food products are not covered by item 4 and are therefore not prepared meals. They are also not food of a kind specified in any other items in the Schedule 1. Therefore, these food products are not excluded from being GST-free by section 38-3 of the GST Act.

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