Edited version of private ruling

Authorisation Number: 1011604681182

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Ruling

Subject: GST classification of food products

Question 1

Are your supplies of frozen food products (Products ABC) by a manufacturer (Manufacturer) GST-free supplies?

Answer

Yes, your supplies of Products ABC are GST-free supplies.

Question 2

Is your supply of another frozen food product, Product Z, a GST-free supply?

Answer

No, your supply of another frozen food product, Product Z, is not a GST-free supply.

Relevant facts and circumstances

You are seeking a private ruling on Products ABC manufactured by the Manufacturer, which are for sale through your stores.

On the Manufacturer's website they inform that they sell Products ABC from its premises and in selected stores.

For each of Products ABC, you have provided the Manufacturer's packaging, which include ingredient lists, cooking instructions and a serving suggestion.

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 and

A New Tax System (Goods and Services Tax) Act 1999 Section 38-4.

Reasons for decision

Question 1

A supply of food is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (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 in section 38-4 of the GST Act to include, amongst other things, food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act). The Manufacturer food products considered in this ruling are foods for human consumption and therefore, satisfy the definition of food in 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 to the GST Act (Schedule 1). The foods that are considered in this ruling are not specifically listed in Schedule 1. As such, the issue is whether each of these food products are a 'food of a kind' specified in Schedule 1.

The phrase 'food of a kind' is not defined in the GST Act. However, the words 'of a kind' and their meanings were considered in Hygienic Lily Ltd v. Deputy Commissioner of Taxation (NSW) (1987) 13 FCR 399. 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.

As item 4 of Schedule 1, which lists 'food marketed as a prepared meal, but not including soup', is of most relevance in this case, we will examine each of the food products in turn against this item.

The Further Supplementary Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998 (the EM) provides that the term 'prepared meal' is intended to cover a range of food products that:

· directly compete against take-aways and restaurants

· require refrigeration or freezing for storage, and

· are marketed as a 'prepared meal'.

So what needs to be determined is whether these food products are marketed as a 'prepared meal', if they are to be considered as prepared meals for the purposes of Schedule 1.

The term 'prepared meal' is not defined in the GST Act and will therefore bear its ordinary meaning.

The Macquarie Dictionary defines 'meal' as 'the food eaten or served for a repast'. This definition could be applied to a single food item or to a meal consisting of several food items.

The Macquarie Dictionary defines 'prepare' in relation to food as 'to get ready for eating, as a meal, by due assembling, dressing or cooking'.

Further to the above, 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

· how the goods are distributed.

The EM at paragraph 1.33 provides examples of prepared meals:

prepared meals, such as curry and rice dishes, mornays and similar dishes sold cold by a take-away or supermarket that only need reheating to be ready for consumption

· fresh or frozen lasagne

· sushi

· cooked pasta dishes sold complete with sauce

· frozen TV dinners

· fresh or frozen complete meals (for example, single serves of a roast dinner including vegetables and low fat dietary meals).

All of the above meals, except for the sushi, are of a kind that are duly assembled, cooked or partly cooked and require heating and completion of the cooking process for them to be ready for consumption. Sushi is by its nature ready for consumption when it is duly assembled even though part of it is raw.

Therefore, 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). 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 is taken to mean warmed in the microwave oven, convection oven, frying pan, wok or saucepan.

Paragraph 1.34 of the EM provides examples of food items that are not considered to be prepared meals. They are:

· frozen vegetables

· uncooked pasta products

· fish fingers

· baby food, baked beans, spaghetti and Irish stews that do not require refrigeration or freezing.

In your case, Products ABC themselves require either cooking in the microwave for eight or nine minutes, or they can be reheated in an oven or on a stovetop.

However, for these products to be eaten as part of a complete meal the labelling on the packaging recommends to the consumer that they be served with additional food such as pasta or steamed rice. This indicates that these foods products are not meant to be served on their own but in combination with other food items, and are not complete meals in themselves.

As they are then not foods marketed as prepared meals, they are not of a kind specified by item 4 of Schedule 1.

Question 2

Manufacturer's Product Z is distinguished from Products ABC addressed in this ruling, in that there is little or no assembling or preparation required before it can be served as a ready-to-eat meal.

The Manufacturer recommends that the only addition to the serving of Product Z is to add certain seasoning, whereas Products ABC are recommended to be served along with either vegetables, pasta, rice, or mash potato.

Product Z is packaged in a container suitable for a single serve, whereas Products ABC addressed in this ruling have a serving size of two. This indicates that this product needs to only be heated and is ready to serve and be eaten right out the container without having to add another food such as rice to make it a complete meal. Only additional seasoning may be required.

On balance, these factors indicate that Manufacturer's Product Z is marketed as a prepared meal. Therefore, it is a food of a kind specified by item 4 of Schedule 1.