Edited version of private ruling

Authorisation Number: 1011708662910

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Ruling

Subject: GST and Food

Question

Are you making a GST-free supply when supplying your food products?

Answer

Yes, you are making a GST-free supply when supplying your food products.

Relevant facts and circumstances

Relevant facts

You are registered for GST.

You supply three food products that you produce from fresh food.

They are fully cooked, then frozen prior to packaging in vacuum sealed plastic bags with minimum 3 week to 6 month shelf life. They are delivered to retail stores in frozen condition and sold defrosted.

They are supplied to a few select supermarkets.

The current way of promoting your product is in-store taste testing and sampling that are free to the customer.

The products are not marketed as a prepared meal as they need further preparation and other additions to become a complete meal.

All three products are already cooked but must be re-heated prior to human consumption, as per the instructions on the labels.

Currently your food products are not sold to caterers or other wholesalers of meals.

Reasons for decision

Section 9-5 of the GST Act states that you make a taxable supply if:

(a)     you make the supply for consideration; and

(b)     the supply is made in the course or furtherance of an enterprise that you carry on; and

(c)     the supply is connected with Australia; and

(d)     you are registered, or required to be registered.

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

In your case, the supplies of your food products are for consideration, the supplies of the products are made in the course or furtherance of your enterprise, the supplies are connected with Australia and you are registered for GST. Therefore, your supplies of your food products meet all of the requirements of a taxable supply listed in paragraphs 9-5(a) to 9-5(d) of the GST Act.

The supplies of your food products are not input taxed under any provision of the GST Act however we must examine whether the supplies of your food products are GST-free supplies.

 Section 38-2 of the GST Act states:

A supply of *food is GST-free.

Food is defined in section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment). From the information that you have supplied, the supplies of your food products are food for human consumption and therefore, satisfy the definition of food in section 38-4 of the GST Act.

However, paragraph 38-3(1)(c) of the GST Act states that a supply of food is not GST-free under section 38-2 of the GST Act if it is a supply of:

food of a kind specified in the third column of the table in clause 1 of Schedule 1, or food that is a combination of one or more foods at least one of which is food of such a kind;

Item 4 in clause 1 of Schedule 1 to the GST Act (Item 4) lists food marketed as a prepared meal, but not including soup. Consequently, a supply of food marketed as a prepared meal (not including soup) will not be GST-free according to paragraph 38-3(1)(c) of the GST Act.

The Further Supplementary Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998 (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.

Paragraph 1.33 of the EM provides examples of prepared meals which include:

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

A prepared meal is something that is capable of being a meal in itself.

You have advised that your food products are made, cooked and vacuum sealed in plastic bags, and have a shelf life of 3 weeks to 6 months. Although they require refrigeration you state that they are not a prepared meal nor are they marketed this way. You further state that they need further preparations and some additions before they can be considered to be a meal. As such, they do not fall within the definition of a prepared meal under Item 4. Consequently, they are not excluded from being GST-free under section 38-3 of the GST Act.

On that basis, the 3 food products that you supply fall within the meaning of food in section 38-4 of the GST Act, and therefore you are making a GST-free supply under section 38-2 of the GST Act.