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Edited version of private ruling
Authorisation Number: 1011499035949
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Ruling
Subject: Food classification
Question
How do I calculate the goods and service tax (GST) applicable to our supplies of food?
Answer
In order to calculate the GST to be remitted to the Australian Taxation Office (ATO) you need to establish the taxable portion you supply and remit GST of one eleventh of the consideration received for the taxable portion.
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You are registered for GST.
You operate as a retail food supplier to end consumers who receive weekly packages of food.
Reasons for decision
From the list you provided, we have established that you provide 'mixed supplies' which means some of the products are taxable and some are GST-free. Therefore, it is necessary for you to apportion the taxable and GST-free components in order to calculate the GST payable.
Goods and Services Tax Ruling GSTR 2001/8 (GSTR 2001/8) discusses apportionment of GST on mixed supplies. Paragraphs 28 and 29 of GSTR 2001/8 state::
28. The amount of GST payable on a taxable supply is 10% of the value of the taxable supply. The application of sections 9-70, 9-75 and 9-80 to a mixed supply gives an amount of GST payable of 10% of the value of the taxable part of the mixed supply.
29. To work out the value of the taxable part of a mixed supply, you identify the parts of the supply and apportion the consideration to each of the parts. The value of the taxable part is 10/11 of the consideration for the taxable part, and the GST payable is equivalent to 1/11 of that consideration.
I have enclosed a copy of GSTR 2001/8 which discusses some of the different methods accepted by the ATO for apportioning mixed supplies.
In order for you to apportion your mixed supplies we have classified your products with regard to their taxable or GST-free status in accordance with GST Act.
Section 38-2 of the GST Act states 'A supply of *food is GST-free.'.
However, section 38-3 of the GST Act describes food that is not GST-free and refers to Schedule 1 of the GST Act.
Schedule 2 of the GST Act describes beverages and ingredients for beverages that are GST-free.
Item 4 of Schedule 1 of the GST Act ensures food marketed as a prepared meal, not including soup, cannot be GST-free. A prepared meal is something that is capable of being a meal in itself. To be a prepared meal, a fish fillet would normally need to be accompanied by chips, salad, vegetables, rice or pasta. The mere addition of a sauce will not normally have the effect of converting a fish fillet into a prepared meal to which item 4 applies unless the fish and the sauce together form a meal in themselves. For example, fish fillets that are sold with only a coating of sauce or a sauce marinade are not prepared meals. To be a prepared meal, fish fillets must be either marketed as a prepared meal or they must directly compete with takeaways or restaurants. In practical terms this means they would be accompanied by chips, salad, pasta, rice or vegetables for example.
The GST food guide has been based on the above provisions, is available on the ATO website and has been used for reference to classify your products.
Further issues for you to consider
After referring to GSTR 2001/8,if you are still unsure whether your method of apportionment is appropriate you can provide specific details of the method you propose to use and apply for a further GST ruling to confirm it is acceptable to the ATO.