Edited version of your written advice

Authorisation Number: 1051337778416

Date of advice: 16 February 2018

Ruling

Subject: GST classification of frozen products

Question

Is the sale of the listed products GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Relevant facts and circumstances

You operate a bakery and you are registered for GST.

You sell Vegetable pastry and Cheese pastry (the Products) to the general public through the supermarkets. The Products are promoted and advertised as fresh uncooked frozen products that can be cooked at home.

You provided pictures and ingredients of the Products.

The ingredients of the Vegetable pastry are vegetable, cream and puff pastry.

The ingredients of the Cheese pastry are a variety of cheeses, cream and puff pastry.

The Products are shaped in a triangle.

The Products are packaged and tightly sealed in clear plastic with a number of pieces weighing a certain amount.

The Products require refrigeration and are sold frozen with a recommendation to be stored below a certain temperature.

There is an instruction to cook the Product in the oven at a certain temperature for approximately a number of minutes.

Your website contains a picture of the cooked Products.

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 25.

Reasons for decision

Summary

The supply of the Vegetable pastry and Cheese pastry (the Products) is a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Detailed reasoning

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

Food is defined in paragraph 38-4(1)(a) of the GST Act to include 'food for human consumption (whether or not requiring processing or treatment)'. The Products are food for human consumption.

However, 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 clause 1 of Schedule 1 to the GST Act (Schedule 1). The Products are not specifically listed in Schedule 1. As such, the issue is whether the Products are 'food of a kind' specified in Schedule 1.

The phrase 'of a kind' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that term. The Macquarie Dictionary (1997) does not define the entire phrase 'of a kind' however, it defines the word 'kind' to mean:

1. A class or group of individuals of the same nature or character, especially a natural group of animals or plants. 2. Nature or character as determining likeness or difference between things: things differing in degree rather than in kind. 3. A person or thing as being of a particular character or class: he is a strange kind of hero. 4...

Accordingly, something will be 'of a kind' if it is of the same nature or character (possessing the same distinguishing qualities) as the thing or group in question.

In addition, the case law Lansell House Pty Ltd & Anor v FC of T 2011 ATC 20-239 at [30] relevantly provides:

The use of the words "of a kind" in s 38-3(1)(c) of the GST Act adds further generality to the description of the items described in Schedule 1: Air International Pty Ltd v Chief Executive Officer of Customs (2002) 121 FCR 149 per Hill J. Thus, a new product that does not possess all of the same characteristics of known crackers may nevertheless be within the relevant item…

In coming to its decision, Lansell also considered, among other things, the product’s

• use

• in store display

• marketing

• tax treatment in the country of manufacture, and

• appearance.

Accordingly, it is considered that food will be 'food of a kind' listed in Schedule 1 if it is food belonging to the same class or genus as food listed in Schedule 1.

Of relevance to this case is item 25 of Schedule 1 (item 25) which lists pastizzi, calzoni and brioche under the category bakery products. In particular, we need to determine if the Products are ‘of a kind’ of pastizzi referred to in item 25.

Clause 2 of Schedule 1 provides that, for the purpose of determining whether particular food is covered by any of the items in the table in Schedule 1 relating to the category of bakery products, it does not matter whether the food is supplied hot or cold, or requires cooking, heating or thawing or chilling prior to consumption.

The ATO view on pastry products is provided in Issue 30 of the Food Industry Partnership - Issues Register (Issue 30).

Issue 30 provides that in order for products to be of a kind to the food products listed in items 22, 23 and 25, the products would need to be baked before consumption. Consequently, those products that are fried, steamed or boiled cannot be considered to be of the same kind.

The Macquarie Concise Dictionary 3rd Edition (the Macquarie Dictionary) defines 'pastry' to be:

1. food made of paste or dough, as the crust of pies, etc. 2. articles of food of which such paste forms an essential part, as pies, tarts, etc."

Item 25 - pastizzi, calzoni and brioche

The term 'pastizzi' is not defined in The Macquarie Dictionary (1997). However, the general meaning of the term provided by culinary reference books is that a pastizzi is a traditional Maltese pastry that is boat shaped and contains a variety of fillings. A pastizzi is made of puff pastry and traditionally is filled with ricotta cheese. However, a pastizzi may also contain various other fillings and is baked.

ATO Interpretative Decision ATO ID 2002/118 refers to uncooked frozen filo pastries with savoury vegetarian fillings which may contain either spinach, mushroom or sprout fillings and come in round, triangular and log shapes. It provides that even though the filo pastries with vegetarian savoury fillings are raw and frozen they are considered to be food that is of a kind of pastizzi.

This indicates that for the purposes of item 25, the shape of the food item (i.e. whether boat shaped, a triangle, or a parcel) and the type of pastry used are not considered determinative of the nature or quality of food that is of a kind of pastizzi.

In addition, the Detailed food list which provides details of the GST status of major food and beverage product lines includes the following:

filo pastry with savoury vegetable filling (supplied hot or cold or requires cooking, heating, thawing or chilling prior to consumption)	taxable	ATO ID 2002/118 Item 25, Schedule 1 (food of a kind similar to pastizzi) and clause 2 of the GST Act apply.
pastizzi (supplied hot or cold or requires cooking, heating, thawing or chilling prior to consumption)	taxable	Schedule 1, item 25 and clause 2 of the GST Act apply
pastry triangles/parcels (filled and baked, supplied hot or cold or requires cooking, heating, thawing or chilling prior to consumption)	taxable	Schedule 1, item 25 and clause 2 of the GST Act apply. Food of a kind similar to pastizzi.
vegetable triangles (supplied hot or cold or requires cooking, heating, thawing or chilling prior to consumption)	taxable	Schedule 1, item 25 and clause 2 of the GST Act apply.

In this case, the Vegetable pastry is made of puff pastry filled with vegetable and cream and shaped in a triangle. Similarly, the Cheese pastry is made of puff pastry filled with cheeses and cream and shaped in a triangle.

Although the Products are not boat-shaped like pastizzi, the type of pastry used and the fillings are of the same nature and quality as that generally associated with pastizzi (which are traditionally filled with ricotta cheese, but may contain various other fillings). Hence, the Products are ‘of a kind’ of a pastizzi referred to in item 25.

Therefore, although the Products are supplied raw and frozen, they are still food of a kind listed in Schedule 1. Accordingly, the supply of the Products is not GST-free under section 38-2 of the GST Act.

The supply of the Products is a taxable supply if the requirements of section 9-5 of the GST Act are satisfied.

Section 9-5 of the GST Act provides that you make a taxable supply if:

(a) you make the supply for consideration

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

(c) the supply is connected with the indirect tax zone and

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

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

The supply of the Products satisfies the requirements in paragraphs 9-5(a), 9-5(b), 9-5(c) and 9-5(d) of the GST Act as follows:

● the supply of the Products is for consideration,

● the supply is made in the course or furtherance of your enterprise,

● the sale is connected with the indirect tax zone and

● you are registered for GST.

The supply of the Products is not GST-free under section 38-2 of the GST Act or under any other provision of the GST Act or of another Act. In addition, the supply of the Products is not input taxed. Therefore, as all the requirements of section 9-5 of the GST Act are satisfied, the supply of the Products is a taxable supply.

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