1051575647090 | Legal database

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Edited version of private advice

Authorisation Number: 1051575647090

Date of advice: 3 September 2019

Ruling

Subject: GST and frozen finger food

Question

Is the supply of the frozen finger food GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes.

Relevant facts and circumstances

You manufacture finger food.

The finger foods are sold frozen, uncooked and not ready to eat.

The frozen finger foods are sold in bags of a particular weight and with a variety of fillings.

The frozen finger foods consist of a savouring filling wrapped in a layer of dough and then boiled, steamed or pan fried.

There are a number of bags in a carton box which are sold wholesale to supermarkets.

You provided a picture of the contents of a bag.

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 22

A New Tax System (Goods and Services Tax) Act 1999 Schedule 1, Clause 1, item 23

A New Tax System (Goods and Services Tax) Act 1999 Schedule 1, Clause 1, item 25

Reasons for decision

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 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). The frozen finger foods satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act as 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 frozen finger foods are not specifically listed in Schedule 1. As such, the issue is whether frozen finger foods are 'food of a kind' specified in Schedule 1.

Of a kind

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...

In sales tax cases and when determining the phrase 'of a kind', the Courts have determined the 'essential character of the goods'. Essential character derives from the basic nature of the goods, from what they are, though composition, function and other factors necessarily play a part.

The GST case Lansell House Pty Ltd & Anor FC of T 2010 ATC 10851 (Lansell 2010) did not provide an essential character test, rather it provided an overall impression test. Sunberg J held that the words in item 32 are not used in a specialised or trade sense that differs from their ordinary usage, and that it is a matter of overall impression in deciding the proper classification of a product. Note that this Federal Court decision has been upheld by the Full Federal Court, hence this quote from the Federal Court decision is still relevant.

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 lawLansell House Pty Ltd & Anor v FC of T 2011 ATC 20-239 (Lansell 2011) 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...

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.

Item 22 of Schedule 1 lists 'pies (meat, vegetable or fruit), pasties and sausage rolls'. All of these products are baked. Therefore, in order for the frozen finger foods to belong to the same class of food as 'pies (meat, vegetable or fruit), pasties and sausage rolls' they need to be baked. As the frozen finger foods are either boiled, steamed or pan fried, they are not considered to be 'food of a kind' known as 'pies (meat, vegetable or fruit), pasties and sausage rolls'.

Item 23 of Schedule 1 lists 'tarts and pastries'. After consultation with The Food Consultative Committee it is considered that the reference to 'tarts and pastries' in item 23 of Schedule 1 is to sweet and not savoury pastries. Moreover, item 23 of Schedule 1 is not intended to be a catch all provision for all products that are made from pastry. As such, the frozen finger foods are not 'food of a kind' known as 'tarts or pastries'.

Item 25 of Schedule 1 lists 'pastizzi, calzoni and brioche'. All of these products are baked. Therefore, in order for the frozen finger foods to belong to the same class as 'pastizzi, calzoni and brioche' they need to be baked. As the frozen finger foods are either boiled, steamed or pan fried, they are not considered to be 'food of a kind' known as 'pastizzi, calzoni and brioche'.

The frozen finger foods are not food of a kind specified in Schedule 1. Furthermore, the supply of the frozen finger foods does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the supply of the frozen finger foods is GST-free under section 38-2 of the GST Act.

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