Edited version of private ruling

Authorisation Number: 1011657437061

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: GST and its application to frozen fried rice.

Question 1

Are you making a taxable supply when you sell 'X fried rice'?

Answers

Yes, you will be making a taxable supply on the sale of 'X fried rice'.

Relevant facts

You are a distributor of food products.

You requested advice about whether GST was applicable to the sale of 'X' frozen fried rice packages.

The product is specifically imported by you for Company Y, will be sold to Company Y and promoted through their retail outlets.

The product is manufactured for human consumption and consists of rice with vegetables.

The product is pre-cooked then frozen and packaged in a tray sealed with clear film.

According to the packaging information you sent in, the product is a 'frozen meal' which is prepared by re-heating in the container in which it was purchased.

Reasons for decision

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 subsection 38-4(1) of the GST Act to include amongst other things, food for human consumption (whether or not requiring processing or treatment). Rice and vegetables are food for human consumption; accordingly fried rice with vegetables would satisfy the definition of food under section 38-4 of the GST Act.

However, under subsection 38-3(3) of the GST Act, a supply 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 food considered in this ruling is not specifically listed in Schedule 1. As such, the issue is whether this food product is '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 whether your frozen fried rice falls within this scope.

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'.

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

The word 'meal' is defined in The Macquarie Dictionary to mean '...the food eaten or served for a repast'. This definition could be applied to one or many food items. The Macquarie dictionary further defines 'prepare' to mean 'to get ready for eating…by assembling, dressing or cooking'.

Further to this in determining whether the item is a 'prepared meal', the activities of the seller are important. We will consider the following in establishing if the meal is of a kind of a 'prepared meal':

· 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 examples except sushi are 'of a kind' which 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 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.

In your case, the 'X fried rice' would directly compete with fried rice sold by take aways and restaurants. As indicated by the product packaging, the fried rice with vegetables must be stored below X⁰C which means it requires freezing for storage. The remaining feature to be considered is whether your fried rice is marketed as a 'prepared meal' for the purpose of Schedule 1.

The instructions on the packaging are indicative of the nature of the product that you are selling. The instructions indicate you place the frozen meal in to the microwave and cook on high for a short time. The fact that the packaging contains the words "frozen meal" indicates that the product will be marketed as a 'prepared meal' for the purposes of Schedule 1. Further to this the product is supplied in a single serve and depicted as served in a bowl as a meal in itself rather than as a component of a meal. The product composition, packaging and instructions support that the product is marketed as a prepared meal and that it is 'food of a kind' that falls within the scope of item 4 in Schedule 1 of the GST Act. Therefore the 'X fried rice' you supply to Company Y is marketed as a prepared meal.

The 'X fried rice' you supply is of a kind specified as not being a GST-free supply for the purposes of paragraph 38-3(3) of the GST Act. As all of the conditions of a taxable supply are met, your supply of the 'X fried rice' will be subject to GST.