Edited version of private advice

Authorisation Number: 1052114537738

Date of advice: 5 June 2023

Ruling

Subject: GST - supply of frozen food products

Question

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

Answer

Table 1: Supply of listed range of products

Relevant facts and circumstances

You produce a range of handmade products for both retail and wholesale purposes.

You are registered for GST.

The Products are prepared through processing a range of ingredients then wrapping them in a bean curd or flour-based skin before steaming, packaging and freezing them.

The Products are sold frozen. Depending on a consumer's preference, a product can then be steamed, fried or boiled before consumption.

The Products are sold through your retail outlet and via your web site. The Products are also sold direct to hoteliers and restaurateurs on a bulk wholesale basis.

The Products are marketed and promoted on your web site and on your social media pages.

You provided images of the packaging and the product specification sheets, where we extracted information.

Reasons for decision

Summary

The supply of the Buns with sweet fillings is not GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). The supply of these Buns is a taxable supply under section 9-5 of the GST Act.

The supply of the Buns with savouring fillings, Dim Sims, Dumplings and Spring rolls is GST-free under section 38-2 of the GST Act.

Table 2: Supply of the Buns with savouring fillings

Detailed reasoning

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 to include food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act).

Subsection 38-3 of the GST Act provides that a supply of food is not GST-free if, among other things, it is a supply of food of a kind specified in the third column of the table in clause 1 of Schedule 1 (Schedule 1), or food that is a combination of one or more foods at least one of which is food of such a kind (paragraph 38-3(1)(c) of the GST Act).

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

Relevant for consideration are the following items in Schedule 1:

• Item 4 of Schedule 1(item 4)
• Item 22 of Schedule 1 (item 22)
• Item 25 of Schedule 1 (item 25)
• Item 27 of Schedule 1 (item 27)

Item 4

Item 4 lists 'food marketed as a prepared meal, but not including soup'. Clause 2 of Schedule 1 of GST Act provides that prepared food can be supplied hot, cold, or require cooking, heating, thawing or chilling prior to consumption. Clause 3 of Schedule 1 of the GST Act provides that item 4 only applies to food that requires refrigeration or freezing for its storage.

The term 'prepared meal 'referred to in item 4 is not defined in the GST Act and therefore takes its ordinary meaning.

In the context of food, 'prepare' is defined in the Macquarie Dictionary Online as:

2. to get ready for eating, as a meal, by due assembling, dressing, or cooking.

And meal as:

noun 1. one of the regular repasts of the day, as breakfast, lunch, or dinner.

2. the food eaten or served for a repast.

Essentially therefore, a prepared meal would be a 'repast ready for eating'.

The ATO view on what is a 'prepared meal' is provided in Issue 5 of the Food Industry Partnership - Issues Register (Issue 5). This issue and all the information within it is a public ruling for the purposes of section 105-60 of Schedule 1 to the Taxation Administration Act 1953.

Issue 5 provides that 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). It is considered that making dressing available will satisfy this requirement, as it allows the consumer to add the level of dressing to meet their personal tastes.

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.

Issue 5 provides that 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

A lack of promotional or advertising activities by the supplier (including a wholesaler) does not result in the product not being marketed as a prepared meal. How a product is marketed is determined by "the total process whereby goods are put onto the market" (Cascade Brewery Company Pty Ltd & Anor v FCT (2006) ACT 4339 23.

The term 'marketed', in the context of 'marketed as a prepared meal' suggests the aim of the supplier, determined objectively, is to present the goods as being a prepared meal. Therefore, when examining the characteristics of a product, all the relevant factors will be looked at together in deciding the proper classification of the product. That is the classification decisions for GST purposes are often questions of fact and degree, a matter of overall impression and a combination of fact finding and evaluative judgment. (Lansell House Pty Ltd & Anor v FCT 2010 ATC 20-173, at paragraph 108).

Items 22 and 25

Item 22 lists 'pies (meat, vegetable or fruit), pasties and sausage rolls'

The Macquarie Dictionary provides the following definitions:

Pie - 'a baked dish consisting of a sweet (fruit, etc) or savoury (meat, fish, etc) filling, enclosed in or covered by pastry, or sometimes other topping as mashed potatoes'

Pastie - 'a type of pie in which a circular piece of pastry is folded around a filling of vegetables, meat etc., and baked'

Sausage roll - 'a roll of baked pastry filled with sausage meat'

Item 25 lists 'pastizzi, calzoni and brioche'.

The ATO view on pastries for the purposes of Schedule 1 is provided in Issue 30 of the Food Industry Partnership - Issues Register (Issue 30). It provides that products captured by items 22 to 25 of Schedule 1 "incorporate pastry as their outer layer" and are baked. It further provides that "those products that are fried cannot be considered to be of the same kind". Issue 30 lists the following products as GST-free:

• dim sims
• spring rolls
• samosas
• curry puffs
• chicken filo parcels
• beef wellington

Item 27

Item 27 lists bread (including buns) with a sweet filling or coating.

Application to the Products

The Products are prepared through processing a range of ingredients including meat and vegetables then wrapping them in a bean curd or flour-based skin before steaming, packaging and freezing them. The Products are sold frozen and depending on a consumer's preference, a product can then be steamed, fried or boiled before consumption.

The Products are food for human consumption and satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act.

However, the supply of the Products is not GST-free if it is food of a kind specified in Schedule 1.

Based on the presentation of the Products, their packaging, the instructions and the promotion we do not consider the Products to be "food marketed as a prepared meal" of a kind listed in item 4. Furthermore, we do not consider the Products to be of a kind of pies, pasties or sausage rolls in item 22 nor are the Products of a kind listed in item 25.

The Buns with sweet fillings are of a kind listed in item 27.

The Buns with savoury fillings, Dims Sims, Dumplings and Spring rolls are not food of a kind covered by item 27.

Conclusion

As the Buns with sweet fillings are of a kind listed in item 27, they are excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. Therefore, the supply of the Buns with sweet fillings is not GST-free under section 38-2 of the GST Act.

The supply of the Buns with sweet fillings is a taxable supply under section 9-5 of the GST Act because:

•         you supply the Buns with sweet fillings for consideration

•         you make the supply in the course of operating your business

•         the supply is connected with the indirect tax zone (Australia)

•         you are registered for GST and

•         the supply of the Buns with sweet fillings is neither GST-free nor input taxed under a provision of the GST Act or under the provision of any other Act.

The supply of the Buns with savouring fillings, Dim Sims, Dumplings and Spring rolls is GST-free under section 38-2 of the GST Act because:

•         these products satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act as food for human consumption and

•         their supply does not fall within any exclusions in section 38 3 of the GST Act.

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