Edited version of private ruling

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Ruling

Subject: GST and dessert products

Question 1

Is the supply of the dessert products GST-free?

Answer 1

No, the supply of the dessert products is a taxable supply.

Question 2

Is the importation of the dessert products GST-free?

Answer 2

No, the importation of the dessert products is a taxable importation.

Relevant facts:

· The entity (you) is registered for goods and services tax (GST) and carrying on an enterprise.

· You import dessert products and on-supply the products in Australia.

· The products are marketed as a dessert and sold as separate rectangular slices individually wrapped and packaged together in a cardboard box.

· The dessert products are not supplied for consumption on the premises from which they are supplied.

· All the dessert products are frozen for storage and require thawing prior to consumption.

· The ingredients of each dessert product include flour, egg, sugar, natural flavouring and water.

· The products would typically be eaten as a dessert or a snack after thawing.

Reasons For Decision

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states that you make a taxable supply if:

· you make the supply for consideration

· the supply is made in the course or furtherance of an enterprise that you carry on

· the supply is connected with Australia, and

· you are registered, or required to be registered for GST.

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

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 to include food for human consumption (whether or not requiring processing or treatment) at paragraph 38-4(1)(a) of the GST Act. The products are ready to eat desserts. As such, they are food for human consumption and satisfy the definition of food contained in paragraph 38-4(1)(a) of 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 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.

The dessert products are not specifically listed in Schedule 1. However, an item that is of particular relevance to the supply of the dessert products is Item 20 in Schedule 1 (Item 20).

Item 20 lists various products under the heading 'bakery products', such as 'cakes, slices, cheesecakes, pancakes, waffles, crepes, muffins and puddings'. Of relevance to the dessert products are cakes, slices, cheesecakes and puddings. As such, it is necessary to determine whether the dessert products are a kind of 'cake, slice, cheesecake or pudding'.

The phrase 'of a kind' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that term. The Macquarie Dictionary (1997) does not define the entire phrase 'of a kind'. However, it defines the word 'kind' to mean:

1. A class or group of individuals of the same nature or character, especially a natural group of animals or plants. 2. Nature or character as determining likeness or difference between things: things differing in degree rather than in kind. 3. A person or thing as being of a particular character or class: he is a strange kind of hero. 4. '

Accordingly, something will be 'of a kind' if it is of the same nature or character (possessing the same distinguishing qualities) as the thing or group in question.

The terms 'cake, slice, cheesecake and pudding' are not defined in the GST Act and therefore take on their ordinary meaning.

Cakes and slices

The Macquarie Dictionary, 1997, 3^rd edition (the dictionary) defines 'cake' to mean, amongst other things, 'a sweet baked food in loaf or layer form, made with or without shortening, usually with flour, sugar, eggs, flavouring, usually with baking powder or soda, and a liquid'. The relevant definition of slice in the dictionary is any of several cakes or biscuits cooked or formed as a thin slab and cut into rectangular pieces.

The dessert products are in layer form and are packaged as separate rectangular pieces in each box. The main part (base) of all the dessert products a certain cake and the other major part (topping). Hence, the dessert products have the appearance and the consistency of a layered cake or slice.

The Detailed Food List, which is a public ruling and available on our website www.ato.gov.au lists the following:

Consequently the dessert products are considered to be a kind of cake or slice for the purposes of Item 20.

Importation

An importation is not subject to GST if it is a non-taxable importation within the meaning of section 13-10 of the GST Act. Paragraph 13-10(b) of the GST Act states that an importation is a non-taxable importation if it would have been a supply that was GST-free or input taxed if it had been a supply.

Conclusion

The dessert products are food of a kind specified at Item 20 in the third column of the table in clause 1 of Schedule 1. Hence, the exclusion at paragraph 38-3(1)(c) of the GST Act applies.

The entity is registered for GST and it sells the dessert products for consideration in the course of carrying on its enterprise in Australia. Therefore the supply of the dessert products is a taxable supply as the requirements of section 9-5 of the GST Act are met.

As the entity's supply of the dessert products is a taxable supply, the importation is not a non-taxable importation within the meaning of section 13-10 of the GST Act and is therefore also subject to GST.