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Ruling

Subject: Food classification

Question

Is the supply of liquid food for the preparation of ice cream GST-free?

Answer:

Yes

Relevant facts:

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

You carry on an enterprise of supplying liquid food for the preparation of ice cream.

The liquid food is supplied in a frozen state for transportation and storage reasons.

You advised that the frozen liquid foods are not for consumption but needs to be defrosted and processed further before consumption. The final product is an ice cream.

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 Section 38-4

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 Schedule 1

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) provided that the supply does not come within any of the exclusions listed in section 38-3 of the GST Act.

Food is defined in subsection 38-4(1) of the GST Act to include food for human consumption whether or not requiring processing or treatment (paragraph 38-4(1)(a) of the GST Act). The liquid food for preparing ice cream is food for human consumption. The food is defrosted and then processed further before being served as ice cream food.

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:

The frozen liquid food for preparing ice cream is not sold as hot food and is not for consumption on the suppliers' premises. Next we have to consider whether the frozen liquid food for preparing ice cream is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). The relevant items that may be applicable are listed under the 'ice cream food' category in Schedule 1. They are:

Foods that are of a kind specified in items 28 to 30 in Schedule 1 are frozen confectionary and are supplied ready for consumption and generally do not require further processing. For example, item 28 in Schedule 1 lists food such as ice cream, ice cream cakes are ready for consumption. The Australian Taxation Office (ATO) provides a view on the GST status of food in the public ruling "Detailed Food List" (Food lists) and it provide other examples of food listed under item 28 in Schedule 1, such as soft serve ice-cream and soft serve yoghurt.

Item 31 in Schedule 1 lists other food not listed under items 28 to 30 in Schedule 1 but are similar kind of food.

Liquid food for preparation of ice- cream

Although the liquid food is supplied to your clients in a frozen state, they are not food of a kind specified in items 28 to 30 in Schedule 1. The liquid food is not ready for consumption and requires further processing to prepare the ice cream food.

You advised that the liquid food is frozen for transportation and storage reasons. The frozen liquid food cannot be consumed as ice cream as they require further processing. Your client must defrost the liquid food and process the liquid food into ice cream food for consumption. Therefore, the frozen liquid food for making ice cream is not food of a kind specified in items 28 to 30 in Schedule 1.

For the same reasons, the frozen liquid food is not covered by item 31 in Schedule 1. The frozen liquid food is not food that is similar to any of the products listed in items 28 to 30 in Schedule 1. Therefore, the frozen liquid food is not food of a kind that is specified in Schedule 1 and accordingly, is not excluded by paragraph 38-3(1)(c) of the GST Act from being GST-free.

As the frozen liquid food for preparing ice cream does not fall within any of the other exclusions in section 38-3 of the GST Act, the supply of the liquid food is GST-free under section 38-2 of the GST Act.

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