Edited version of your written advice

Authorisation Number: 1012930097433

Date of advice: 5 January 2016

Ruling

Subject: GST and Food classification: frozen products

Questions

1) ls your supply of frozen patties (patties) GST-free?

2) Is your supply of frozen products (products) GST-free?

Answers

1) Yes, your supply of the patties is a GST-free sale of food.

2) No, your supply of the product is not GST-free, it is a taxable supply.

Relevant facts and circumstances:

You are registered for goods and services tax (GST). You supply food products to food service distributors and wholesalers.

You supply patties and products for human consumption in Australia.

The patties

The patties are frozen and ready to serve in less than 60 seconds.

The products

The products are frozen and ready for heat and serve in 90 seconds. There are serving ideas and pictures of products served with cheese, onion, or with roasted vegetable or with side salad.

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 Section 38-4

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

Reasons for decision

Summary

Your supply of the patties is a GST-free sale of food under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Your supply of the products is not GST-free as the omelettes are prepared meals and are excluded from being GST-free under paragraph 38-3(1)(c) of the GST Act.

Detailed reasoning

Questions 1 and 2

GST is payable by you 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.

In your case, you will satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. That is, you will supply the patties and products for consideration and in the course or furtherance of an enterprise that you carry on. Additionally, these supplies will be connected with Australia and you are registered for GST.

There are no provisions in the GST Act under which your sales of the patties and products will be input taxed supplies.

Therefore, the next step is to consider whether your sales of the patties and products will be a GST-free supply.

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 (paragraph 38-4(1)(a) of the GST Act).

The patties and products satisfy the definition of food because they are sold as food for human consumption. Therefore the patties and products will be GST-free unless they fall within any of the exclusions in section 38-3 of the GST Act. Of relevance to your circumstances is the exception under paragraph 38-3(1)(c) of the GST Act.

Paragraph 38-3(1)(c) of the GST Act provides that 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 (Schedule 1).

Schedule 1

The patties and products are not specifically included in Schedule 1. Nevertheless, they 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 also 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 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-away 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 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

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.

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.

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.

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".

In order to determine whether the patties and products you supply are prepared meals, it is necessary to refer to the ATO view concerning prepared meals.

The Australian Taxation Office (ATO) view on prepared food is provided in "Issue 5: Prepared food" in the Food Industry Partnership Goods and Services Tax Industry Issues and the Detailed Food list (available from the ATO website www.ato.gov.au), a public ruling for the purposes of the Taxation Administration Act 1953.

This view indicates that prepared meals are restricted to either one type or a number of different types of a food together that constitute a complete meal when supplied. Therefore the ATO view considers whether the food type is usually supplied with further accompaniments or not.

The patties:

The patties are food for human consumption that is not of a kind specified in Schedule 1 of the GST Act. The patty is not considered to constitute a meal; it would normally be served with some other items such as bread. Paragraph 38-3(1)(c) of the GST Act does not exclude the supply of the patties from being a GST-free supply.

Hence your supply of the patties will be GST-free.

The products:

There are no serving suggestions on the packaging to indicate that the products need to have further components added to get it ready for eating as a meal. Further the labelling does not indicate that the product is a salad or a side-dish. Products are often served on their own, unlike the products patties which are often served with accompaniment such as bread. You market your products in a way that indicates the products will be ready to be served as lunches and dinner instead of regular meals, which would also indicate your products are meant to be supplied as a prepared meal and not as a side dish.

The products offer a balance of ingredients and we consider that the side salad in the marketing brochure of this product is just a serving suggestion.

The website states that the products are fully cooked- simply heat and serve in just 90 seconds.

The products are therefore duly assembled, that just requires heating to complete the cooking process ready for consumption. They satisfy the requirement of prepared meals per the EM.

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. Hence clause 2 is satisfied.

The products are frozen and need to be kept refrigerated/frozen for storage. Therefore the products satisfy Clause 3 of Schedule 1.

Further, the very nature of a prepared meal is that it is quick and easy to get ready for consumption, as opposed to preparing the meal yourself using various different fresh food items. A prepared meal would contain all or many of the components that would be included in a complete meal, such as those provided by a restaurant or takeaway outlet, and only minimal preparation would be required for the meal to be ready for consumption.

After considering all of the above factors it is concluded that the products are 'prepared meal' under item 4 and is not a supply of food that is GST-free, as it is excluded from being GST-free under paragraph 38-3(1)(c) of the GST Act. Therefore the supply of the products is subject to GST.

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