Edited version of your written advice

Authorisation Number: 1012781741522

Ruling

Subject: GST and pureed baby food

Question

Is the supply of the pureed baby food products goods and services tax (GST) free?

Answer

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 a company registered for GST.

• You are part of a tax consolidated group which includes a number of food supplier companies.

• You are contemplating entering into a venture to launch frozen baby puree products.

• The first stage of the baby purees are designed for 4 month old babies. The ready- made purees are made with 100% real fruit and are available in a number of flavours.

• The second stage is protein purees for 6 month old babies. These are made with a pureed mix of meat, fish and 100% real vegetables and are available in a number of flavours.

• The products are made from natural products and contain no preservatives. The purees are snap frozen and available in a disposable ice cube tray and the desired amount of cubes can be heated in the microwave and served for consumption.

• The purees will be available in the freezer sections of retail outlets.

Relevant legislative provisions

All references are to the A New Tax System (Goods and Services Tax) Act 1999:

Section 38-2

Section 38-3

Section 38-4

Schedule 1

Reasons for decision

Summary

The supply of the pureed baby food products are not prepared meals and are GST-free under Section 38-2 of the A New Tax System (Goods and Service Act) Act 1999 (GST Act).

Detailed reasoning

A supply of food is GST-free under section 38-2 of the 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). Your food products are food for human consumption and satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act.

Under paragraph 38-3(1)(c) of the GST Act, 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. Of specific relevance is Item 4 of Schedule 1 (Item 4), which provides that food marketed as a prepared meal (but not including soup) is not GST-free. Item 4 is intended to cover a range of food products of a kind that have the conditions below:

• directly compete against takeaways and restaurants

• require refrigeration or freezing for its storage, and

• are marketed as a 'prepared meal'.

You have advised that your pureed baby food products require refrigeration or freezing for their storage. You have classified your pureed baby food products as baby food and argued that the intent of the GST legislation is for baby food to be GST-free.

The GST Food Guide (NAT 3338-07.2005) published on our website www.ato.gov.au (food guide) does list baby food as GST-free but only to the extent that it is in tins or jars and does not require refrigeration or freezing. If a baby food is correctly classified as a prepared meal that requires refrigeration or freezing for its storage, it may not be GST-free by action of Item 4.

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:

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

2. 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 against 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 beans, spaghetti and Irish stew that do not require refrigeration or freezing. [emphasis added]

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.

You have claimed that your products do not compete against takeaways and restaurants as they are food for babies and are not designed for adults. Issue 14 in Food Industry Partnership Issues Register published by the Tax Office provides clarity in its discussion in 'Beverages for Infants'. Issue 14 concludes:

It was clearly intended by the legislature that the beverages and ingredients for beverages referred to in item 13 are those to be consumed by people with special dietary needs. Therefore, the word 'infant' for the purposes of item 13 means 'a person up to the age of 12 months'.

It follows that 'baby' is a subset of 'infant'. 'Baby' is defined by the Macquarie Online Dictionary, sixth edition as 'an infant, young child'.

On balance, we do not consider that the pureed baby food products are similar to the types of taxable prepared meals listed in the food guide. The pureed baby food products do not belong to the class of a prepared meal and therefore are not of a kind of Item 4. Consequently these products do not fall under Item 4 and are not excluded from being GST-free.

Consequently when you supply your pureed food for babies you are making a GST-free supply under section 38-2 of the GST Act.

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