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Ruling

Subject: GST treatment of pre-packaged soft serve ice-cream base

Question 1

Is your supply of frozen soft-serve base a GST-free supply?

Answer

Yes.

Relevant facts and circumstances

You are registered for GST.

You will manufacture a soft-serve and frozen dessert making product for supply to retailers.

This product comprises product supplied in a frozen state for hygiene, shelf-life and safety reasons.

You have advised that the soft-serve base that you supply is not in a form for consumption as soft-serve ice cream.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999

Subdivision 38-A

Schedule 1

Reasons for decision

Summary

Your supply of the frozen product is a GST-free supply. The product comes within the definition of food for human consumption in section 38-4 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

The product does not fall within Items 28 to 31 of Schedule 1 of the GST Act as it is not ready for consumption as an ice-cream food.

Detailed reasoning

Generally a supply of 'food' is GST-free. 'Food' is defined in subsection 38-4(1) of the GST Act as, relevantly:

(a) food for human consumption (whether or not requiring processing or treatment);

(b) ingredients for food for human consumption

…

However, paragraph 38-3(1)(c) of the Act states that a supply of food is not GST-free if it is food of a kind specified in clause 1 of Schedule 1. The categories of food that are taxable pursuant to clause 1 of Schedule 1 include 'ice-cream food'.

You have advised that the soft-serve base that you supply is not in a form for consumption as soft-serve ice cream. It requires further processing or treatment. Therefore, in the state in which you supply the product, it does not fall within Items 28 to 31 of the Schedule. Further processing is required before the product is considered to be an ice-cream food under the Schedule.

We consider that in its current form the product is a food for human consumption requiring further processing, and is therefore a GST-free food. Only when the product is supplied in its final state by retailers can it be classified as a taxable ice-cream food.

Section 38-6 of the GST Act considers the packaging of food. A supply of packaging in which food is supplied is GST-free if the supply of the food is GST-free. However, the packaging is only GST-free under this section to the extent that it is necessary for the supply of the food, and it is packaging of a kind in which food of that kind is normally supplied.

The packaging you supply your product in is necessary and normal to the supply of the particular food product that you are supplying. As your product is GST-free in its current state, the packaging is also GST-free under section 38-6 of the GST Act.