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Ruling

Subject: Prepared food

Question 1

Is the supply of the prepared food GST free?

Advice

Yes

Question 2

If yes, are you making a taxable importation when you import the prepared food into Australia?

Advice

No

Relevant facts:

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

You supply the prepared food in a pouch.

You import the prepared food (in a pouch) from overseas.

The pouch contains the prepared food and is vacuumed sealed.

The prepared food in the pouch is shelf stable.

The prepared food does not require refrigeration or freezing for storage.

The prepared food can be consumed without any preparation or heating.

Reasons for decisions

1. Is the supply of the meal GST free?

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.

Food is defined in section 38-4 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). As the prepared food is for human consumption, the prepared food satisfies the definition of food in paragraph

38-4(1)(a) 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 any of the items in clause 1 of Schedule 1 of the GST Act (Schedule 1), or

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

The prepared food is vacuum packed in a pouch and is shelf stable. The prepared food is not supplied as food for consumption on the suppliers' premises or is hot food for consumption away from the suppliers' premises.

Next we need to consider whether the prepared food is food of a kind specified in Schedule 1 of the GST Act. Paragraphs 38-3(1)(c) and (d) of the GST Act provide that a supply of food is excluded from being GST free if it is food of a kind specified in Schedule 1 or is a combination of one or more foods at least one of which is food of such a kind specified in Schedule 1.

We consider item 4 in Schedule 1 maybe applicable to the prepared food. Item 4 in Schedule 1 is about food marketed as a prepared meal but not including soup. However, a prepared meal under item 4 in Schedule must also satisfy clauses 2 and 3 in Schedule 1

Clause 2 in Schedule 1 provides:

For the purpose of determining whether particular food is covered by any of the items in the table relating to the category of prepared food it does not matter whether it is supplied hot or cold, or requires cooking, heating, thawing or chilling prior to consumption.

You advised that the prepared food can be consumed without any preparation or heating. Therefore the prepared food satisfies clause 2 in Schedule 1.

Clause 3 in Schedule 1 states:

Item 4 in the table only applies to food that requires refrigeration or freezing for its storage.

That is, a food product is a prepared meal under item 4 in Schedule 1 if the food product requires refrigeration or freezing for its storages (clause 3 in Schedule 1). The Australian Tax Offices (ATO) outlines its view on "Prepared Food" in the ruling "Foods and Services Tax Industry Issue - Food Industry Partnership - Prepared Food" (Ruling). We enclose a copy for your reference.

The Ruling outlines 3 conditions for prepared food specified in item 4 in Schedule 1. They are: 

the food product does directly compete against take-aways and restaurants;

the food requires refrigeration or freezing for storage; and

it must be marketed as a prepared meal

This is explained in example 5 in the Ruling. Paragraphs 22 to 23 of the Ruling state:

22. A vacuum sealed bag of noodles contains all ingredients, including the sauce, and only requires reheating to be ready for consumption. In order to be a prepared meal, three criteria need to be satisfied:

a) The product must directly compete against take-aways and restaurants;

b) It must require refrigeration or freezing for storage; and

c) It must be marketed as a prepared meal.

23. Since the product does not require refrigeration or freezing for its storage it will not be considered a 'prepared meal'.

The prepared food is vacuumed packed in a pouch and is shelf stable. The prepared food in the pouch do not require refrigeration or freezing for storage. Therefore the prepared food is not prepared food specified in item 4 in Schedule 1.

The prepared food is not food of a kind specified in item 4 or any other items in Schedule 1, the prepared food is therefore not excluded from being GST-free under section 38-3 of the GST Act. The supply of the prepared food is GST free under section 38-2 of the GST Act.

2. If yes, are you making a taxable importation when you import the prepared food into Australia?

Section 13-5 of the GST Act states:

You make a taxable importation if:

(a) goods are imported; and

(b) you enter the goods for home consumption (within the meaning of the Customs Act 1901).

However, the importation is not a taxable importation to the extent that it is a *non-taxable importation.

* is a defined term in the GST Act.

Section 13-5 of the GST Act provides that the importation of goods into Australia is taxable if they are entered for home consumption unless the importation is a non-taxable importation.

The meaning of "non-taxable importation" is provided in section 13-10 of the GST Act and it states:

An importation is a non-taxable importation if:

(a) it is a non-taxable importation under Part 3-2; or

(b) it would have been a supply that was *GST-free or *input taxed if it had been a supply.

Under paragraph 13-10(b) of the GST Act, an importation is a non-taxable importation if, had the importation been a supply, the supply would have been GST-free or input taxed.

The ATO view on non-taxable importation under paragraph 13-10(b) of the GST Act is provided in Goods and Service Tax Ruling GSTR 2003/15 which is a ruling on importation of goods into Australia.

Paragraphs 250 to 252 of GSTR 2003/15 outline the conditions for non-taxable importations of goods under paragraph 13-10(b) of the GST Act. The paragraphs state:

250. An importation of goods that would have been GST-free or input taxed, if it were a supply, is a non-taxable importation. For example, the supply of a wheelchair is GST-free, therefore, an importation of a wheelchair is a non-taxable importation.

251. In determining whether an importation, if it had been a supply, would have been GST-free or input taxed, the Commissioner considers that you need to hypothesise that the importation were a supply to the importer. If this hypothetical supply to the importer would have satisfied one of the exemptions in Chapter 3 of the Act, the importation is non-taxable.

252. Non-taxable importations under paragraph 13-10(b) include importations of:

food or beverage items that satisfy the exemption criteria in Subdivision 38-A…

That is, where a supply of food is GST free under section 38-2 of the GST Act, the importation of the food will be a non-taxable importation under paragraph 13-10(b) of the GST Act.

As the prepared food is GST-free under section 38-2 of the GST Act the importation of the prepared food will be a non-taxable importation.

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