Edited version of private ruling

Authorisation Number: 1011650117213

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Ruling

Subject: GST and supply of yoghurt

Question 1

Is your supply of normal yoghurt GST-free?

Answer: Your supply of normal yoghurt is only GST-free if it is not combined with a food product that is taxable.

Question 2

Is your supply of frozen yoghurt GST-free?

Answer: No, your supply of frozen yoghurt is not GST-free.

Question 3

Is your supply of yoghurt which is used to make a smoothie GST-free?

Answer: No, your supply of yoghurt which is used to make a smoothie is not GST-free.

Relevant facts and circumstances

You are registered for GST.

You supply yoghurt near the food court of a large shopping centre.

All of the yoghurt you supply contains fresh yoghurt as well as other ingredients depending on the flavour.

The yoghurt is supplied in a take-away container (tub).

You supply three types of yoghurt:

Normal plain yoghurt similar to Greek yoghurt which is kept at a temperature between 3 and 6 degrees. It is popular in the morning as most customers have it with fruit.

Frozen yoghurt which is kept at a temperature between 0 and -5 degrees.

A milk shake, liquid type yoghurt which is used for smoothies. It is kept at a temperature of approximately 0 degrees. Customers usually add fruit to the smoothie and instead of a tub, customers are supplied with a cup and a straw with a spoon at the end.

The retail shop does not have any dine-in facilities. The yoghurt and containers have been tailored so that customers can walk around and eat and you consider that most customers would eat away from the food court.

Reasons for decision

Question 1

Summary

Your supply of normal yoghurt is GST-free as long as it is not combined with a food product that is taxable.

Detailed reasoning

Section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that a supply of food is GST-free 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.

The term 'food' is defined in section 38-4 of the GST Act and includes food for human consumption (whether or not requiring processing or treatment).

Normal yoghurt that you supply is food for human consumption and therefore, it will satisfy the definition of food in section 38-4 of the GST Act.

However, subsection 38-3(1) of the GST Act provides, amongst other things, that a supply of food is not GST-free if it is a supply of:

· food for consumption on the premises from which it is supplied, or

· food of a kind specified in the third column of the table in clause 1 of Schedule 1 to 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.

Food for consumption on the premises from which it is supplied

Paragraph 38-3(1)(a) of the GST Act provides that a supply of food for consumption on the premises from which it is supplied is not GST-free. This is irrespective of whether the item of food would be GST-free if sold in other circumstances.

The term 'premises' is defined in section 38-5 of the GST Act. This section states:

Premises, in relation to a supply of *food, includes:

(a) the place where the supply takes place; or

(b) the grounds surrounding a cafe or public house, or other outlet for the supply; or

(c) the whole of any enclosed space such as a football ground, garden, showground, amusement park or similar area where there is a clear boundary or limit;

but does not include any part of a public thoroughfare unless it is an area designated for use in connection with supplies of food from an outlet for the supply of food.

( * Denotes a defined term in the GST Act )

Goods and Services Tax Determination GSTD 2000/4 provides further guidance on the meaning of the word 'premises' in the expression 'a supply of food for consumption on the premises from which it is supplied'.

In particular, paragraph 1 of GSTD 2000/4 provides that food courts, where tables are supplied for customers of food retailers, will satisfy the definition of premises in relation to a supply of food as a place where the supply takes place.

However, Goods and Services Tax Determination GSTD 2000/5 which provides guidance on when a supply of food is 'for consumption on the premises from which it is supplied', states at paragraph 1 that, whether you supply food for consumption on the premises from which it is supplied will depend on the circumstances surrounding the supply.

Following on from this, paragraph 4 in GSTD 2000/5 provides that if your business operations do not identify takeaway supplies from dine-in supplies, food will remain GST-free if:

· it is served in its original or takeaway form (for example, an unprocessed apple or unopened bottle of water), and

· it is not served in circumstances indicating that consumption will take place on the premises (for example, the food is not served at a table).

This means that, if it can be reasonably anticipated that a supply of GST-free food will be consumed away from the premises, then it remains GST-free. However, if a supply of GST-free food is served in circumstances indicating that consumption will take place on the premises (for example, customers may receive their meals at their tables or food could be served on a plate or on a returnable tray), then it is subject to GST.

In your case, based on the information provided, you do not make a distinction between dine-in (consumption in the food court) and takeaway supplies. All customers are supplied with yoghurt in a takeaway container which has been tailored so that they can walk around and eat and, you consider that most customers would eat away from the food court.

Therefore, as normal yoghurt is sold in its takeaway form and it is not served in circumstances indicating that consumption will take place in the food court, it can be reasonably anticipated that your supply of the normal yoghurt is for consumption away from the food court.

Accordingly, your supply of normal yoghurt is not excluded from being GST-free under paragraph 38-3(1)(a) of the GST Act.

Food of a kind specified in Schedule 1

Paragraph 38-3(1)(c) of the GST Act provides that food of a kind specified in Schedule 1, or food that is a combination of one or more foods at least one of which is food specified in Schedule 1 is not GST-free.

The following items which are listed in Schedule 1 are of relevance to your situation:

Item 29 - frozen confectionery, frozen yoghurt and frozen fruit products (but not frozen whole fruit).

In relation to yoghurt, item 29 of Schedule 1 (Item 29) lists frozen yoghurt as not being GST-free.

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

The Macquarie Dictionary provides that the word 'frozen' means 'frigid; very cold' and '(of food) preserved by refrigeration'. The word 'cold' means 'having a relatively low temperature; having little or no temperature' and the word 'very' means 'in a high degree, extremely or exceedingly'.

These definitions indicate that to come within the meaning of the word 'frozen' the food product would need to have a temperature that is very low, such as, 0 degrees or less.

Based on the information provided, the normal yoghurt you supply is not covered by Item 29 and as such, will be GST-free unless it falls within any of the other exclusions in subsection 38-3(1) of the GST Act.

As stated previously, paragraph 38-3(1)(c) of the GST Act provides that a combination of foods, one of which is food of a kind specified in Schedule 1 will not be GST-free. Instead it will be taxable.

You have advised that most customers have the normal yoghurt with fruit.

Therefore, if the normal yoghurt is mixed with other food products and comprises a combination of foods, one of which is food of a kind specified in Schedule 1, this means that the supply of the final product will not be GST-free due to the operation of paragraph 38-3(1)(c) of the GST Act.

Question 2

Summary

Regardless of the environment in which it is sold, your supply of frozen yoghurt is not GST-free as it is covered by Item 29 and as such, is specifically excluded from being GST-free by subsection 38-3(1) of the GST Act.

Detailed reasoning

Frozen yoghurt is food for human consumption. However, paragraph 38-3(1)(c) of the GST Act precludes food products from being GST-free if they are listed in Schedule 1 or are a combination of foods, one of which, is listed in Schedule 1. Item 29 identifies frozen yoghurt as a product in Schedule 1 that is not GST-free.

Based on the information provided, the frozen yoghurt you supply will be covered by Item 29 and as such, will not be GST-free.

In addition, any final product that you supply that includes frozen yoghurt will also not be GST-free regardless of whether the other ingredients, by themselves, may be GST-free.

Question 3

Summary

Regardless of the environment in which it is sold, your supply of yoghurt which is used to make a smoothie is not GST-free as it is not covered by any of the items in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2) and as such, is specifically excluded from being GST-free by subsection 38-3(1) of the GST Act.

Detailed reasoning

As stated previously, a supply of food is GST-free 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.

The term 'food' is defined in section 38-4 of the GST Act and includes beverages for human consumption and ingredients for beverages for human consumption. From the information provided, the liquid type yoghurt which is used to make smoothies is a beverage (or an ingredient for a beverage) for human consumption and therefore, it satisfies the definition of food in section 38-4 of the GST Act.

However, under paragraph 38-3(1)(d) of the GST Act, beverages (or an ingredient for a beverage) are only GST-free if they are specified in Schedule 2.

This means that for the liquid type yoghurt which is used to make a smoothie to be GST-free, it must come within one of the items specifically listed in Schedule 2.

Item 2 in Schedule 2 (Item 2) lists as GST-free, beverages which consist of at least 95% of milk products but not flavoured beverages.

In this case, your smoothies consist of a liquid type yoghurt to which customers usually add fruit. Notwithstanding the ingredients that are used to make up the smoothie, it is the end product that must be considered.

From the information available, it is considered that the smoothie you supply does not consist of at least 95% of milk products and as such, it is not covered by Item 2.

Item 12 in Schedule 2 (Item 12) is also of relevance to your situation. Item 12 lists as GST-free, non-alcoholic non-carbonated beverages, if they consist of at least 90% by volume of juices of fruits or vegetables.

While the smoothies you supply are non-alcoholic and non-carbonated, they do not consist of at least 90% by volume of the juices of fruits or vegetables. Therefore, your smoothies are not covered by Item 12.

In addition, your smoothie is not covered by any of the other items in Schedule 2.

Accordingly, your supply of a smoothie is not GST-free.

It should be noted that, the decision would be the same even if the smoothie was considered to be food rather than a beverage. This is because the liquid type yoghurt used to make the smoothie would constitute frozen yoghurt and as such, would be covered by Item 29 (see Question 2).