Edited version of private advice

Authorisation Number: 1052232390473

Date of advice: 22 March 2024

Ruling

Subject: GST and food classification

Question

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

Answer

No. The supply of the Products is a taxable supply.

Relevant facts and circumstances

You are registered for goods and services tax (GST).

You are going to supply the Products to major retailers who will sell them in frozen state to consumers.

The Products are buns with sweet fillings.

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 27

Reasons for decision

A supply of food is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) ('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)'. In the present case the Products are 'food for human consumption' under section 38-4 of the GST Act.

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.

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 online Macquarie Dictionary (Macquarie Dictionary) 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, 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...

Item 27 of Schedule 1 (Item 27)

Under the category of Bakery products, Item 27 specifies bread (including buns) with a sweet filling or coating.

In accordance with section 182-15 of the GST Act and Note 2 in Schedule 1, the category heading 'Bakery products' is not an operative part of Schedule 1. As such, the category heading may only be used as an interpretation tool in certain circumstances, for example, where the description of an item listed in Schedule 1 is ambiguous or obscure. In this case, it is clear that Item 27 includes buns with a sweet filling.

The Products are buns with sweet fillings. Therefore, the Products are food of a kind specified at Item 27.

As the Products are food of a kind listed in Schedule 1, the supply of the Products is excluded from being GST-free by section 38-3 of the GST Act.

Taxable supply

A supply is a taxable supply under section 9-5 of the GST Act if:

a.   the supply is for consideration; and

b.   the supply is made in the course or furtherance of an enterprise carried on by the supplier; and

c.   the supply is connected with Australia; and

d.   the supplier is 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.

Your supply of the Products is for consideration and is made in the course of your enterprise. The supply is connected with Australia because the Products are delivered, or made available, in Australia to the purchasers. Furthermore, you are registered for GST and the supply of the Products is neither GST-free nor input taxed. Therefore, the supply of the Products is a taxable supply.

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