Edited version of your written advice

Authorisation Number: 1012797373996

Ruling

Subject: GST and food products

Question

Is the supply of your food products GST-free?

Answer

No, with the with the exception of the Food A and the Food B which remain GST-free.

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 trustee of a trust and are registered for the goods and services tax (GST).

• You carry on an enterprise of operating a food store (store).

• The store is part of a franchise chain of stores.

• The stores are located at shopping centres, food courts, airports and along street fronts.

• All the stores supply food items in a similar manner - as takeaway over the stores' counters.

• You have previously obtained two PBRs from the Australian Taxation Office (ATO) in which the ATO ruled on the GST classification of your food products.

• This revised ruling only applies to the food products that were the subject of the previous PBRs and does not apply to the other food products included in the previous PBRs.

• You do not provide table service.

• You promote your stores and your menu on your website and also on your Facebook page.

• Previous photographs you have posted on your Facebook page show your food being provided in a 'Combo pack' with a bottle of water similar to 'meal deals' provided at fast food outlets.

• The Food B is a mixture of fruit pieces packed in a clear plastic container.

• The food is sold as takeaway food and are not for consumption on the premises from which they are supplied.

• The food is packed in plastic takeaway containers with a clear lid. The takeaway containers could be clear (transparent) or black containers. There is no labelling or advertising on the container to indicate the branding or marketing of the foods supplied. There is no literature or instructions in the food packaging.

• The Food B is packed in a takeaway container and not served on a platter.

• Customers are provided with disposable plastic takeaway utensils in a sealed plastic packet.

• The food products are supplied pre-packed or made-to-order according to customers' selections of the food ingredients and dressings.

• All the food products are assembled and dressed and ready for consumption and do not require further preparation.

• There is no hot food in the takeaway food.

• The food products require refrigeration for storage and are not served at temperature above room temperature.

Relevant legislative provisions

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

Section 38-2

Subsection 38-3(1)

Paragraph 38-3(1)(c)

Paragraph 38-4(1)(a)

Schedule 1

Reasons for decision

Summary

The supplies of your food product with the exception of the plain Food A and the Food B are food marketed as a prepared meal and therefore are a taxable supply and subject to GST.

The Food A and the Food B are not a type of food that we consider is a prepared meal and is more akin to a side serving accompanying a meal in the case of the Food A and a dessert style dish in the case of the Food B and are therefore GST-free.

Detailed reasoning

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.

The definition of food in section 38-4 of the GST Act includes food for human consumption, whether or not requiring processing or treatment. Your food products are sold in your food outlets as food for human consumption and consequently can be treated as food for human consumption.

However, subsection 38-3(1)(b) and 38-3(1)(c) of the GST Act provide, amongst other things, that a supply of food is not GST-free if it is a supply of:

• food of a kind specified in the third column of the table in clause 1 of Schedule 1 to the GST Act (Schedule 1), or food that is a combination of one or more foods at least one of which is food of a kind.

Schedule 1

In considering Schedule 1 for your food products it is only necessary to consider Item 4 of Schedule1 which covers prepared meals.

With the exception of the Food C and Food A, your food products are not specifically named in Schedule 1. Nevertheless, these products may be subject to GST by virtue of paragraph 38-3(1)(c) of the GST Act which refers to food of a kind to those foods listed in Schedule 1. Item 4 excludes prepared meals and food marketed as prepared meals, but not including soup from GST-free status.

When considering food under Item 4 we need to consider conditions outlined in clauses 2 and 3 of Schedule 1 of the GST Act. Clause 2 of Schedule 1 provides when considering prepared food under items 1 to 7, it does not matter whether the food is sold hot, cold or frozen or require cooking, heating, thawing or chilling prior to consumption. Clause 3 of Schedule 1 provides that Item 4 only applies to food that requires refrigeration or freezing for its storage.

Prepared Meals

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 3rd 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 rise dishes, mornay 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.

The Australian Taxation Office (ATO) view on prepared food is outlined in Goods and Services Tax Industry Issue - Food partnership Prepared Food (Prepared Food) (available from the ATO website www.ato.gov.au), a public ruling for the purposes of the Taxation Administration Act 1953.

Paragraph 12 of the Prepared Food ruling provides that consideration must be given to the suppliers' activities when deciding on whether a food is marketed as a prepared meal. The considerations are: which states in part:

All of the above meals, except for the sushi, are of a kind that are duly assembled, cooked or partly cooked and require heating and completion of the cooking process for them to be ready for consumption…

Therefore, for food to be regarded as a 'prepared meal' in accordance with Item 4, the food needs to be supplied assembled and dressed (if applicable). In addition, if the food is cooked or partly cooked and is to be served hot, it should only need heating, which may include completion of the cooking process, to be ready for consumption. Heating will be interpreted to mean warmed in the microwave oven, convection oven, frying pan, wok or saucepan.

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.

Consideration is also given to the actual product specifications, labelling, pricing, labelling and marketing as well as any cooking instructions. These are summarised as the "marketing test".

The Marketing test

The issue to consider for the marketing test is whether your food products are marketed as a 'prepared meal'.

Your website and your range of food products are indicative of that found in similar 'ready to eat' food concept stores and takeaway stores.

The information available on your franchise section of the website provides also indicates that your food products compete with traditional takeaway/fast food.

You market your food products in a way that indicates customers are served in a hurry, with minimal wait times which would also indicate your food products being supplied as a prepared meal and not as a side dish.

Further, your Facebook page describes yourself as:

• Fast food restaurant

• Health food restaurant

• Take away restaurant

Previous photographs you have posted on your Facebook page show your food products being provided in a 'Combo pack' with a bottle of water similar to 'meal deals' provided at fast food outlets which also indicates that your food products compete with traditional takeaway/fast food.

The food products require refrigeration for storage and are served from cold display cabinets.

The information and the facts provided, including the website content, the Facebook content, the packaging of your food products and the store locations all support your food products, being marketed as prepared meals in their own right and not as a side dish.

It is considered that your food products satisfy both clauses 2 and 3 of Schedule 1 as the food products are ready for consumption when supplied and they require refrigeration for storage. Your food products are assembled and are marketed as a prepared meal.

Therefore, we consider that your food products are marketed as prepared meals listed in item 4 and are therefore excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

Food A

Traditionally Food A is served as an accompaniment or side dish to a meal. It is not considered to be a prepared meal on its own and would not normally be eaten as such. We consider that Food A is not covered by Item 4. Furthermore, Food A is not covered by any other item in Schedule 1, nor does it come within any of other exclusions listed in section 38-3 of the GST Act.

Accordingly the supply of your Food A is GST-free.

Food B

Traditionally Food B is served as a dessert style dish. It is not considered to be a prepared meal on its own and would not normally be eaten as such. We consider that Food B is not covered by

Item 4.

Item 5 of Schedule 1 applies to a platter or arrangements of food displayed on a shallow dish or plate ready for serving. A platter may contain foods such as cheese, cold cuts, fruits or vegetables.

Food B is packed in a plastic container with a lid. The container does not satisfy the meaning of a platter as the Food B is not displayed on a platter ready for serving. Therefore, Food B is not a food product of a kind listed under item 5 of Schedule 1.

Further, Food B is not food of a kind listed under item 29 of Schedule 1 as it is not frozen. Food B requires refrigeration for storage and is supplied at below room temperature.

Food B is not covered by any other item in Schedule 1, nor does it come within any of other exclusions listed in section 38-3 of the GST Act.

Therefore, Food B is not food of a kind listed in Schedule 1 and is not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

Accordingly the supply of your Food B is GST-free.

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