Edited version of your written advice

Authorisation Number: 1012849789068

NOTICE

This private ruling was revised to an extent following issue. This edited version has therefore been replaced to an extent with the edited version of the private ruling with the authorisation number of 1051305114719.

Date of advice: 4 August 2015

Ruling

Subject: Goods and services tax (GST) and food

Question 1

Is GST payable on your sale of salad and protein combination product 1?

Answer

Yes.

Question 2

Is GST payable on your sale of salad and protein combination product 2?

Answer

Yes.

Question 3

Is GST payable on your sale of salad base?

Answer

No.

Relevant facts and circumstances

You are registered for GST.

You carry on a takeaway food business from shops in Australia.

Your trading name is (trading name).

A number of your shops are near a food court and the other shops are in business districts.

Your shops are only open for business at lunch time.

As part of the business, you supply salad and protein combinations for take away. The names of two of these products are (name 1) and (name 2). You also sell salad base, which is the salad part of a salad and protein combination product (without the protein).

The salad and protein products are fully assembled and dressed and ready to eat and supplied to the public in plastic containers to take away from the shop. The salad base and protein are packed in the same container at the time of sale. There is no special labelling on the containers besides your trading name logo. No literature or instructions are packed with the products.

Salad and protein combination product 1

You assemble different types of salad every day fresh on site in the morning. The types of salad ingredients include (various vegetables). They are put into plastic take away containers and stored in the display fridge for sale.

Different types of protein are available to be selected with the salad and protein product 1 salad base at the time of purchase..

The salad and protein combination product 1 includes a dressing, condiments and herbs.

A salad and protein combination product 1 with meat weighs approximately A to B grams. A salad and protein combination product 1 with mushroom and tofu weighs approximately C grams.

The menu for salad and protein combination product 1 contains the following information:

● Product name: (product name)

● Ingredients

● The words ‘choice of protein’

● The price of each salad and protein combination

● Picture of salad and protein, each in a separate bowl

The words ‘meal’ and ‘lunch’ do not appear on the menu.

Salad base only (component of salad and protein combination product 1)

The weight of the salad base component of a salad and protein combination product 1 is approximately D grams.

Salad and protein combination product 2

A noodle based salad gets mixed and assembled with greens like (various vegetables) every day fresh on site in the morning. They are then put into plastic take away containers and stored in the display fridge for sale.

Different types of protein are available to be selected with the salad and protein combination product 2 salad base at the time of purchase.

The salad and protein combination product 2 includes a dressing and herbs.

A salad and protein combination product 2 with meat weighs approximately E to F grams. A salad and protein combination product 2 with mushroom and tofu weighs approximately G grams.

The menu for salad and protein combination product 2 contains the following information:

● Product name: (product name)

● Ingredients

● The words ‘choice of protein’

● The price of each salad and protein combination

● Picture of salad and protein in a single bowl

● Picture of dressing

The words ‘meal’ and ‘lunch’ do not appear on the menu.

Salad base only (component of salad and protein combination product 2)

The weight of the salad base component of a salad and protein combination product 2 is approximately H grams.

Heating and cooking

The salads are not hot food.

The protein that forms part of the salad and protein combination products is cooked completely in advance and kept on display in metal trays (not inside the display fridge). The protein does not have to be consumed hot. In some rare situations, customers may require some protein to be reheated by microwave and then mixed with the salad base.

Prices

● Prices of the salad and protein combination products are quoted on your menus.

● The price of a salad and protein combination product that includes meat as stated on the menu is (price 1).

● The price of a salad and protein combination product that includes mushroom and tofu as stated on the menu is (price 2).

● A customer can buy a salad base for (price 3).

You have dine-in facilities.

You supply cutlery and serviettes with the salad and protein combination products.

There are no signs or posters at the shops claiming that the salad and protein combination products are nutritionally balanced meals.

The salad and protein combination products come under the heading ‘food’ on your website. The words ‘meal’ and ‘lunch’ do not appear on your website.

Your website offers catering.

Your customers refer to your salad and protein combination products as lunch on websites.

Your website provides a link to Twitter comments made by the (your trading name) franchise. These comments refer to salad and protein combination product 1 and salad and protein combination product 2 (including the mushroom and tofu option specifically) as meals/lunch.

You have done informal market research into the take away industry by obtaining customer feedback and observing businesses that are nearby.

You do not market the salad and protein combination products as being a component for a meal.

The products in question, in their unopened state, would require refrigeration for their storage.

Other products

You also sell other typical take away foods. For example, you sell baguettes with a meat (or mushroom and tofu) and salad filling. It also includes a dressing and a herb.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

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 Schedule 1

Reasons for decisions

Questions 1 and 2

Summary

The salad and protein combination products are food marketed as prepared meals. They are covered by the exclusion at item 4 in the table in Schedule 1 to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). They are not GST-free food under section 38-2 of the GST Act.

Detailed reasoning

GST is payable on your taxable supplies.

You make a taxable supply where you satisfy the requirements of section 9-5 of the GST Act, which states:

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and

(c) the supply is *connected with Australia; and

(d) you are *registered, or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

(*Denotes a term defined in the GST Act)

You meet the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. This is because:

● you supply the salad and protein combination products for consideration

● you supply these products in the course or furtherance of an enterprise that you carry on

● the supplies are connected with Australia, and

● you are registered for GST.

There are no provisions of the GST Act under which your sales of these products would be input taxed.

Therefore, what remains to be determined is whether your sales of these products are GST-free.

GST-free food

Section 38-2 of the GST Act states:

A supply of *food is GST-free.

However, a supply is not GST-free under section 38-2 of the GST Act if an exclusion in subsection 38-3(1) of the GST Act applies.

‘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). In your case, the salad and protein combination products are food for human consumption and therefore, satisfy the definition of food in section 38-4 of the GST Act.

Paragraph 38-3(1)(a) of the GST Act provides that a supply of food for consumption on the premises from which it is supplied is not GST-free under section 38-2 of the GST Act.

Paragraph 38-3(1)(b) of the GST Act provides that a supply of hot food for consumption away from the premises from which it is supplied is not GST-free under section 38-2 of the GST Act.

Paragraph 38-3(1)(c) of the GST Act provides that a supply of food is not GST-free under section 38-2 of the GST Act 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 such a kind.

As you supply the salad and protein combination products in take away containers, we do not consider that you supply them for consumption on your premises. Therefore, the exclusion at paragraph 38-3(1)(a) of the GST Act does not apply.

You supply these products for consumption away from your premises. Therefore, where you supply either of these products with any hot ingredients, the exclusion at paragraph 38-3(1)(b) of the GST Act applies.

Item 4 in the table in clause 1 of Schedule 1 (item 4) states:

*food marketed as a prepared meal, but not including soup

Clause 3 in Schedule 1 states ‘Item 4 in the table only applies to *food that requires refrigeration or freezing for its storage’.

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 (clause 3 of Schedule 1); and

● are marketed as a 'prepared meal'.

The term 'prepared meal' is not defined in the GST Act and will therefore bear its ordinary meaning.

The Macquarie Dictionary provides that 'meal' means "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 EM at paragraph 1.33 provides examples of prepared meals:

● prepared meals, such as curry and rice dishes, mornays 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 dinner including vegetables and low fat dietary meals).

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. Sushi is by its nature ready for consumption when it is duly assembled even though part of it is raw.

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.

A prepared meal is something that is capable of being a meal in itself.

If the food product directly competes with takeaways and restaurants, it is considered to be a prepared meal.

Paragraph 1.34 of the EM provides examples of food items that are not considered to be prepared meals. They are:

● frozen vegetables;

● uncooked pasta products;

● fish fingers; and

● baby food, baked beans, spaghetti and Irish stews that do not require refrigeration or freezing.

Uncooked pasta products are not considered a prepared meal as they are not cooked.

Baby food, baked beans and spaghetti in cans or jars are not considered "prepared meals" as in their unopened state they do not require refrigeration or freezing for their storage - clause 3 of Schedule 1 of the GST Act.

Further to the above, 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.

We consider that your salad and protein combination products are food marketed as prepared meals and they directly compete with take away shops and restaurants because:

● you are marketing the salad and protein together as a single combined product, being salad and protein combination product 1 or salad and protein combination product 2 (your menus quote a single price for each salad and protein combination (referred to as salad and protein combination product 1 or salad and protein combination product 2 on the menu) and at the time of supply, the salad and protein are packaged together for the customer)

● the products are prepared meals and they are suitable as complete meals as:

○ they include salad, protein, sauce/marinade, dressing, herbs and condiments

○ they are fully assembled, dressed and cooked

○ they are each of a suitable size to be eaten as a meal, and

○ they are nutritionally balanced

● the prices of the products are typical take away meal prices

● you do not market the salad and protein combination as a component of a meal

● you supply cutlery and serviettes with the products

● you have dine-in facilities

● your shops are only open for business at lunch time

● you operate a take away shop business; a number of your shops are near food courts and the other shops are in business districts

● your website offers catering

● your customers refer to your salad and protein combination products as lunch on websites

● Twitter comments made by the (your trading name) franchise refer to salad and protein combination product 1 and salad and protein combination product 2 (including the mushroom and tofu option specifically) as meals/lunch, and

● you have done informal market research into the take away industry by obtaining customer feedback and observing businesses that are nearby.

Additionally, the products are not soup and while in an unopened state they would require refrigeration for their storage (if the customer did not eat them soon after purchase). Hence, these products are covered by item 4. Therefore, the exclusion at paragraph 38-3(1)(c) of the GST Act applies.

As one or more exclusions in subsection 38-3(1) of the GST Act apply, your sales of the salad and protein combination products are not GST-free under section 38-2 of the GST Act. Your sales of these products are not GST-free under any other provision of the GST Act. Therefore, as all of the requirements of section 9-5 of the GST Act are met, GST is payable on your sales of these products.

Question 3

Summary

The salad base is not food marketed as a prepared meal.

It is GST-free food under section 38-2 of the GST Act.

Detailed reasoning

The salad base is food for human consumption. Therefore, it is food for the purposes of the GST Act.

Based on the fact that you supply the salad base in a take away container, we do not consider that you supply the salad base for consumption on the premises from which your supply it, even if a particular customer eats it at your shop. Therefore, the exclusion at paragraph 38-3(1)(a) of the GST Act does not apply.

You do not supply the salad base hot. Therefore, the exclusion at paragraph 38-3(1)(b) of the GST Act does not apply.

You market the salad and protein combination products as prepared meals and your menu quotes a single price for a given salad and protein combination. Therefore, where you sell a salad base, it is only a component of a prepared meal. Hence, your salad base is not covered by item 4.

The salad base is not covered by any of the items in the table in Schedule 1 and it is not a combination of foods at least one of which is food of a kind covered by any of these items. Therefore, the exclusion at paragraph 38-3(1)(c) of the GST Act does not apply.

None of the other exclusions in subsection 38-3(1) of the GST Act apply. Therefore, your sales of salad base are GST-free under section 38-2 of the GST Act. Hence, GST is not payable on your sales of salad base.

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