Edited version of private advice

Authorisation Number: 1012656089353

Ruling

Subject: Food Classification

Previously we gave you a private ruling with a specific authorisation number about the GST treatment of sales of:

(a) Brand name Tiramisu 1

(b) Brand name Tiramisu 2

(c) Brand name Tiramisu 3, and

(d) Brand name Truffle.

We have reviewed that private ruling and concluded that it should be revised for the Tiramisu products (a), (b) and (c), but confirm that our decision in relation to the Truffle product (d) remains. That is, sales of (d) the Truffle product remains GST-free.

The following revised private ruling states that under subdivision 38-A of A New Tax System (Goods and Services Tax) Act 1999 the relevant sales of (a) Brand name Tiramisu 1, (b) Brand name Tiramisu 2 and (c) Brand name Tiramisu 3 are all GST-free.

This revised ruling, in relation to the Tiramisu products (a), (b) and (c) described above, takes effect from the date of this advice of revised ruling.

Question

Is the supply of the following food products GST-free under subdivision 38-A of A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

(a) Brand name Tiramisu 1

(b) Brand name Tiramisu 2

(c) Brand name Tiramisu 3

Answer

(a) Brand name Tiramisu 1 - Yes

(b) Brand name Tiramisu 2 - Yes

(c) Brand name Tiramisu 3 - Yes

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are registered for the goods and services tax (GST) and you carry on an enterprise of food retailing.

You retail the following desserts under a brand name to your customers.

Product	Product Name
(a)	Brand name Tiramisu 1
(b)	Brand name Tiramisu 2
(c)	Brand name Tiramisu 3

The three tiramisu products are described as follows:

Brand name Tiramisu 1

The Tiramisu is described as a layered dessert with a particular flavoured filling, sponge cake and soft vanilla crème. The product formulation is:

• glucose syrup,

• flavoured filling,

• reconstituted skim milk,

• water,

• sponge cake, and the balance being various other ingredients.

It is packaged in plastic cups with plastic film and wrap around sticker.

Brand name Tiramisu 2

The Tiramisu is made of type of biscuit with and flavoured cream. The product formulation is:

• water and skim milk,

• pasteurised cream,

• cheese,

• glucose syrup,

• sugar,

• specified type of biscuit,

• vegetable oil and various other ingredients.

It is packaged in plastic cups with plastic film and wrap around sticker.

Brand name Tiramisu 3

The Tiramisu is made with sponge cake in a syrup, layered with a specified topping as well as a dash of a specified wine. The product formulation is:

• skim milk,

• glucose syrup,

• partially reconstituted dried skimmed milk,

• sugar,

• coconut oil,

• water,

• soft cheese

• sponge cake, and various other ingredients.

The food is packaged in a plastic tray with plastic film and cardboard sleeve.

Contentions:

You submit that the tiramisu products are not food "of a kind specified under Item 20" in the table in clause 1 of Schedule 1 on the basis that:

(a) The tiramisu products are not "cakes" under Item 20:

• Cake is not defined in the GST Act and therefore takes its ordinary meaning.

• The tiramisu products do not have the typical ingredients of a cake as in flour, eggs, sugar, flavouring, etc. The sponge cake or biscuit comprises only a specified approximate amount of the tiramisu products.

• Item 20 appears in a group of items under the category of "Bakery products" which indicates that the items listed there are all cooked items.

• General principle of statutory interpretation - "noscitur a socilis" principle which is that the meaning of a word or phrase is to be derived from its context.

• The form and freshness of the Tiramisus is not like that of a cake.

• The above analysis is consistent with the recent decision of the Full Court of the Federal Court in Lansell House Pty Ltd v Commissioner of Taxation [2011] FCAFC 6 which was concerned with the GST classification of products known as Mini Ciabatte. The following propositions from that case are applicable to this matter:

• a product can only have one 'classification' [7] - in this case, the tiramisu products are not 'cakes', they are dairy desserts;

• when considering how a particular product should be classified, it first needs to be considered whether or not there is a trade usage of the phrase. If there is no trade usage, the expression must be used in its ordinary English sense [10] - as discussed above, there is no trade usage of the term 'cake', therefore, what is and what is not a 'cake', is not a bright line test [23];

• the overall impression of the product is what determines its classification; furthermore, multiple factors are taken into consideration [21], [26], [29], which is the approach adopted here;

• a supplier cannot, by a label or by the location of the product display, govern the classification of a product [29] - there is no suggestion here that the label or the location of the products is determinative of the GST classification of the goods, however, it is noted that the tiramisu products are generally refrigerated with other dairy desserts.

(b) The tiramisu products are not of a kind of food specified in Item 20:

• The tiramisu products are desserts, similar to many other cold set dairy desserts which are in a genus or class of their own (for example, including mousses and bavarians) distinguishable from the cakes class or genus and which are, therefore, not of a kind specified in Item 20.

(c) The tiramisu products are not a combination of one or more foods at least one of which is food of a kind specified in Schedule 1:

• The tiramisu products are not considered to be combinations of one or more foods because the individual ingredients lose their separate identities when they are combined together to form a cold set dairy dessert. This occurs to every ingredient that is combined to make something else and the percentage of sponge cake or biscuit is a specified percentage or less in the respective products. Accordingly, the tiramisu products are not taxable because of being a combination of foods at least one of which is of a kind specified in Item 20.

Another brand dessert tiramisu, which you stock and sell as a GST-free dessert, is a similar product to the tiramisu products described above.

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 section 38-4

A New Tax System (Goods and Services Tax) Act 1999 paragraph 38-4(1)(a)

A New Tax System (Goods and Services Tax) Act 1999 Schedule 1 clause 1 item 20

Reasons for decision

A supply of food will be GST-free under section 38-2 if it satisfies the definition of food in section 38-4 and the supply is not excluded from being GST-free by section 38-3.

The meaning of food includes at paragraph 38-4(1)(a), food for human consumption. Your three tiramisu products satisfy the definition of food for the purposes of section 38-4 as they are food for human consumption.

However, under section 38-3 certain supplies of food are not GST-free. Paragraph 38-3(1)(c) is relevant to the tiramisu products and reads as follows:

38-3 Food that is not GST-free

(1) A supply is not GST-free under section 38-2 if it is a supply of:

(c) food of a kind specified in the third column of the table in clause 1 of Schedule 1, or food that is a combination of one or more foods at least one of which is food of such a kind;

In relation to the second limb of paragraph 38-3(1)(c), the tiramisu products are not considered to be a combination of foods in the context of this provision. An example of a product that would be a combination in this context is a snack pack containing cheese and biscuits.

For the purposes of paragraph 38-3(1)(c) the issue is whether the tiramisu products are food of a kind that is specified in the table in clause 1 of Schedule 1. The food product tiramisu is not specifically listed, but item 20 of the table in clause 1 of Schedule 1 (Item 20) is considered the relevant item.

The third column of Item 20 lists 'cakes, slices, cheesecakes, pancakes, waffles, crepes, muffins and puddings' as food that is not GST-free. None of these food products are defined in the GST Act and as such take on their ordinary meaning.

The Australian Oxford Dictionary (online) defines 'tiramisu' as:

An Italian dessert consisting of layers of sponge cake soaked in coffee and brandy or liqueur with powdered chocolate and mascarpone cheese.

The research into tiramisu products shows that there is a significant variation in the type of products that are called tiramisu, including those that are called a tiramisu cake. The issue of what a product is called, or what is on the label, was considered in the Full Federal Court case Lansell House Pty Ltd and Perfek Pty Ltd v Commissioner of Taxation 2011 ATC 20-239 (Lansell House). The Court held at paragraph 29:

"that the supplier cannot, by a label, govern the classification of a product for the purposes of the GST Act."

Therefore, although a wide range of products are called tiramisu, it does not necessary follow that they will all have the same GST classification.

Further, in the Lansell House case at paragraph 23 the Commissioner submitted and it was accepted by the Court:

"that what is and what is not a cracker is not a 'bright line' defined by the percentage of its ingredients."

For the purposes of the GST classification of these tiramisu products, the question is whether they are a kind of cake or cheesecake. These are the foods listed in Item 20 that are considered relevant.

The ordinary meaning of cake and cheesecake, as per the Australian Oxford Dictionary (online), is:

Cake: An item of soft sweet food made from a mixture of flour, fat, eggs, sugar, and other ingredients, baked and sometimes iced or decorated.

Cheesecake: A kind of rich sweet tart made with cream and soft cheese on a biscuit base.

As mentioned the research showed certain tiramisu products with multiple and distinctive layers of sponge or biscuit, these were typically sold in cafes' or restaurants as kinds of cakes. That kind of tiramisu, as currently listed in the Detailed Food List, would be classified as taxable for GST purposes under Item 20 as a 'cake'.

However, there is little comparison between the cream based and mousse type content, structure and appearance of the three tiramisu products at issue to those kinds of tiramisu cakes.

The Brand name Tiramisu 1 and the Brand name Tiramisu 2 have some of the characteristics of a cake and a cheesecake. However, having regard to the essential character of these products they do not fall within the genus, class or description of a 'cake' or 'cheesecake' in Item 20. This is because both these products:

• are not shaped like a cake or have the form of a cake;

• do not meet a generally accepted definition (as above) of a cake as a mixture of flour, eggs, sugar, etc.;

• only have a small base of biscuit or sponge; and

• the overall texture of a mousse type product rather than the texture expected of a cake.

The overall impression of the Brand name Tiramisu 3 product based on its ingredients and physical appearance is that it has relatively small cheese content, is of mousse type texture, has a high soft cream content and is packaged in a way that supports the product before it is served. Generally a cheesecake would be expected to contain a greater cheese content which would give it a firmer structure enabling it to stand on a plate and be sliced. On balance the Brand name Tiramisu 3 does not fall within the genus, class or description of a 'cake' or 'cheesecake' in Item 20.

As such we consider that your described tiramisu products do not meet the requirements of section 38-3, that a supply of food is not GST-free if it is food of a kind that is specified in item 20, to be excluded from being GST-free.

Consequently, the supply of Brand name Tiramisu 1, Brand name Tiramisu 2 and Brand name Tiramisu 3 is GST-free.

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