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Ruling
Subject: GST and food
Question
Is the supply of your food products a GST-free supply of food for the purposes of section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
The supply of one of the products is taxable. The supply of the remaining products is GST-free.
Relevant facts and circumstances
You are registered for goods and services tax (GST).
You carry on an enterprise of selling bread.
You are introducing several new food products into the market.
These products are prepared by spreading fillings onto the dough before baking.
The fillings are savoury in nature with the exception of product 'X' which consists of a sweet filling and a sweet coating.
The products are not sold as hot food and are not for consumption on your premises.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 9-5
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(d)
A New Tax System (Goods and Services Tax) Act 1999 Section 38-4
A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-4(1)(c)
Reasons for decision
Under section 9-40 of the GST Act, GST is payable on taxable supplies that you make. Section 9-5 of the GST Act provides that you make a taxable supply if:
· you make the supply for consideration
· the supply is made in the course or furtherance of an enterprise you carry on
· the supply is connected with Australia, and
· 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.
In your case, you are making the supplies of food products for consideration, the supplies are made in the course of your enterprise, the supplies are connected with Australia, and you are registered for GST.
There are no provisions in the GST Act that would apply to make the supply of the products input taxed. Therefore we need to consider whether the supply is GST-free.
GST-Free Supplies
A supply of food is GST-free under 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 listed 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). Your bread products satisfy the definition of food in section 38-4 of the GST Act because they are food for human consumption.
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). Your bread products are not specifically listed in Schedule 1. However, an item that is of particular relevance to the supply of your food products is Item 27 in Schedule 1 (Item 27).
Item 27 relates to 'Bakery products' and provides that bread (including buns) with a sweet filling or coating is not GST-free. You have advised that the bread and filling are not mixed or combined before baking. The dough is wrapped around the filling before baking, so that the filling is separately contained within the bread. The fillings in the bread products are of a savoury nature and not considered sweet (with the exception of product X).
As the bread products (with the exception of product X) do not have a sweet filling or coating, they are not food of a kind specified in Item 27 and are not specified in any other items in Schedule 1. Therefore the supply of the bread products is GST-free under section 38-2 of the GST Act.
Product 'X'
Your product X is prepared and baked in a similar manner to your other bread products but includes a sweet filling and coating. Therefore it is a bun with a sweet filling and coating and is a food of a kind listed under item 27 in the table in clause 1 of Schedule 1 to the GST Act.
Therefore the supply of product X is excluded from being GST-free under section 38-3 of the GST Act and will be subject to GST.
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