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Ruling

Subject: GST and rice cakes

Question

Is the supply of mini rice cakes with yoghurt topping and mini rice cakes with chocolate topping GST-free?

Answer: Yes.

Relevant facts and circumstances

You plan to sell mini rice cakes with yoghurt topping and mini rice cakes with chocolate and coconut topping (rice cakes).

The rice cakes are:

· gently baked puffed grains of rice

· the same consistency of rice cakes as listed in the GST food guide

· the approximate size of crackers

· topped with a thin layer of milk chocolate or yoghurt.

Summary

Yes, the supply of the rice cakes are GST-free.

Detailed reasoning

Under section 38-2 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act), a supply of food is GST-free. The meaning of the term food for GST purposes is defined in section 38-4 of the GST Act. This definition of food includes food for human consumption, whether or not it requires processing or treatment.

The rice cakes are food for human consumption, and therefore satisfy the definition of food under section 38-4 of the GST Act.

However, under paragraph 38-3(1)(c) of the GST Act, certain supplies of food are not GST-free if it is food of a kind specified in the third column of the table in Schedule 1 of the GST Act (Schedule 1), or food that is a combination of one or more foods at least one of which is food of such a kind.

The categories in Schedule 1 of the GST Act that the rice cakes could potentially fall under are:

· Bakery products

· Biscuit goods

· Savoury snacks

· Confectionery

Bakery products

Item 27 in Schedule 1 specifies that bread (including buns) with a sweet filling or coating is not GST-free. The chocolate and yoghurt rice cakes do have a sweet coating, but the rice cake itself could not be classified as bread, or any of the other items listed in the Bakery products category.

Biscuit goods

It could be argued that the rice cakes fall under item 32 of Schedule 1 because they could be seen as similar to a cracker or a biscuit. 'Biscuit' is defined in the Macquarie Dictionary as:

(a) stiff, sweet mixture of flour, liquid, shortening and other ingredients, shaped into small pieces before baking or sliced after baking.

(b) a savoury, unleavened similar mixture, rolled, sliced and baked crisp.

'Cracker' is defined as "a thin, crisp biscuit".

The rice cakes are not comprised of a mixture of flour (or similar ingredient), liquid, shortening and other ingredients. Although the rice cakes are baked, they are comprised principally of puffed rice. As such, they do not fit the definition of biscuit.

Savoury snacks

The rice cakes are marketed as a healthy snack for young children. It could be argued that they could be covered under item 18 of Schedule 1. To be covered under item 18, a food needs only to be similar to that covered by items 15 or 16 of Schedule 1.

Item 15 specifies potato crisps, sticks or straws, corn crisps or chips, bacon or pork crackling or prawn chips. The foods listed in item 15 are foods that have undergone a cooking process, being either baked or fried. The foods listed under this category are generally of a savoury nature and contain added ingredients, including oil, flavouring or seasoning. The rice cakes do not possess these characteristics. They are not savoury, and the rice cake portion doesn't contain oil, flavouring or seasoning, but contains only puffed rice. The topping is a thin layer of sweet topping consisting of either chocolate and coconut, or yoghurt. Consequently, the rice cakes do not fit under the Savoury snacks category of Schedule 1.

Confectionery

Item 8 of Schedule 1 specifies confectionery, food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery.

The term 'confectionery' is not defined in the GST Act and therefore must be given its ordinary meaning. 'Confectionery' is defined in The Macquarie Dictionary (1997) as 'confections or sweets collectively'. 'Confection' is defined, amongst other things, as 'a sweet preparation (liquid or dry) of fruit or the like...'.

Furthermore, Aickin J in the High Court decision Landau and Anor v. Goldwater and Anor (1976) 13 ALR 192 gave the following general description of the term 'confectionery':

'one of common usage which embraces a wide variety of articles, many readily recognisable as examples of confectionery. They are primarily small articles of a sweet character containing substantial amounts of sugar and regarded as being in the nature of a delicacy in whatever quantity they may be consumed. There is, however, no doubt that in the ordinary parlance the term would now include blocks of chocolate, however small or however large.'

The rice cakes are not marketed as confectionery. They could not be seen as a delicacy, but retain the character of a snack. Given their ingredients, the rice cakes do not fit under the specification of confectionery or food marketed as confectionery.

However, it could be argued that the rice cakes are food consisting principally of confectionery because by weight, as their toppings fit under the specification of confectionery, and at more than 50% in weight, could be seen as principally consisting of confectionery.

An opposing argument could be taken that by volume, the toppings are a thin layer that would be less than 30% of the total width of the product. ATOID 2008/132 looks at the significance that the topping on a pizza has in relation to the whole product. It states that "significant is considered to be 30% or more, by depth of the topping, as compared with the depth of the whole product". Following this line of reasoning, it could be argued that the toppings on the rice cakes, which are only a thin layer, and therefore, less than 30%, are not a significant portion of the rice cake. Taking this into consideration, along with the view that the rice cakes retain the character of a rice snack rather than taking on the appearance of confectionery, we are of the view that the topping should be measured by volume and not by weight. Therefore, the rice cakes would not fit under item 8 of Schedule 1 as being a food consisting principally of confectionery.

The rice cakes are not food listed, or of a kind listed, at any of the items in Schedule 1. Additionally, they are not food that is a combination of one or more foods at least one of which is food of such a kind. This is because they are not considered to be a combination of rice cakes and chocolate or yoghurt, but as a single product consisting of rice cakes with a topping. Hence, the rice cakes are not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

Additionally, the rice cakes are not excluded from being GST-free by virtue of any of the other paragraphs of subsection 38-3(1) of the GST Act. Therefore, the rice cakes are GST-free under section 38-2 of the GST Act.