Edited version of private ruling

Authorisation Number: 1011655313022

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Ruling

Subject: Goods and services tax (GST) and black rice steamed bread and a spring onion steamed bread

Question:

Are your supplies of rice bread and onion bread (Products) GST-free?

Answer:

Yes. Your supplies of rice bread and onion bread are GST-free.

Relevant facts:

· You are registered for GST.

· You run an enterprise which comprises a commercial oriental bakery (bakery shop).

· This bakery enterprise is located in Australia.

· In the course of running your enterprise you supply the following two bakery products for human consumption:

o rice bread, and

o onion bread.

· You have supplied samples of your Products for examination.

· You have supplied photographs of your Products cut open to assist the Taxation Office to determine the GST status of these Products.

· Our observation of your products shows that the products do not have a coating or contain fillings which are not in the dough.

Detailed reasoning

Taxable Supplies

You make a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) if:

· you make a supply in the course or furtherance of an enterprise that you run

· you make the supply for consideration

· the supply is connected with Australia, and

· you are registered for GST.

However, a supply is not taxable to the extent that it is GST-free or input taxed

You run an enterprise which comprises a commercial bakery shop which is located is located in Australia. In the course of running your enterprise you obtain consideration from the supply of your products. You are registered for GST. Therefore all of the requirements of a taxable supply are met for GST purposes.

Division 40 of the GST Act provides that certain types of supplies are input taxed. Your supplies of your products are not input taxed under any of the provisions of Division 40 of the GST Act.

However, you advised us that you supply your Products for human consumption. Division 38 of the GST Act relates to the GST-free supply of food, and is of relevance to your products.

GST-free supplies of food

A supply of food is GST-free under section 38-2 of the 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 paragraph 38-4(1)(a) of the GST Act as 'food for human consumption (whether or not requiring processing or treatment)'.

As stated above, you advised us that you are supplying your Products as food for human consumption, and as such your Products fall under the definition of food for GST purposes.

However, paragraph 38-3(1)(c) of the GST Act provides that a supply of food is not GST-free if it is 'food of a kind' that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1).

It is relevant to consider Item 27 of Schedule 1 with respect to your Products, as Item 27 of Schedule 1 covers bread (including buns) with a sweet filling or coating.

The words 'of a kind' and their meaning have been considered in a number of court cases including Hygienic Lily Ltd v. Deputy Commissioner of Taxation (NSW) (1987) 13 FCR 399. Gummow J in Hygienic Lily Ltd states:

'the setting in which the phrase "goods of a kind" appears suggests it is directed not to the use for which the particular goods in question were designed or manufactured, nor to the purpose to which it is intended those particular goods shall be put, but rather to the nature, quality and adaptation of goods in the class or genus in question. Thus, goods are "of a kind ordinarily used …" if they are to be recognised as members of a class or genus…'

Your products are 'of a kind' of a bun or bread roll. Your Products do not have any type of filling, and they do not have a sweet coating. Rather your Products are 'of a kind' of savoury steamed bun, as (by observation) of the supplied samples show the ingredients are mixed into the dough. As a consequence your Products do not fall within the class of the products specified under item 27 of Schedule 1 of the GST Act. Therefore your Products are not excluded from being GST-free under section 38-3 of the GST Act.

Thus the supply of your Products within Australia is GST-free under section 38-2 of the GST Act. There is no GST liability on a GST-free supply.