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Ruling
Subject: GST and cake products
Question
Is the supply of your cake products a GST-free supply of food for the purposes of section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No.
Relevant facts and circumstances
You are registered for goods and services tax (GST).
You specialises in bread products.
You are introducing several new products into the market. These products are cakes (both in a large and small size).
The cake products contain cake premix. This premix consists of the following ingredients - Wheat flour, sugar, egg powder, salt, milk solids, emulsifier, plus a variety of other ingredients itemised below in Table A.
The premix is a convenient cake mix that produces finely structured, excellent volume and long shelf-life fruit cakes. It can be used to make a variety of traditional fruit cakes and puddings, with the addition of fruits and/or flavours.
PreMix -Table A:
Ingredient Listing: Wheat Flour, Sugar, Egg Powder, Vegetable Margarine {Vegetable Oil, Water, Salt, Milk Solids, Emulsifiers (471, Soybean Lecithin (322)), Flavour, Antioxidant (320), Colour (160a)), Vegetable Oil, Mixed Spice (Cassia, Coriander, Nutmeg, Ginger, Pimento, Cloves), Emulsifier (475, 471),Thickener (1414), Dextrose, Modified Wheat Starch, Milk Solids Non Fat, Iodised Salt, Mineral Salt (500, 541), Vegetable Gum (415, 412), Food acid (330), Flavour, Colour (155,133), Preservative (202), Enzyme (Amylase), Vitamins (Thiamine, Folic Acid)
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 9-5
A New Tax System (Goods and Services Tax) Act 1999 Section 38-2
A New Tax System (Goods and Services Tax) Act 1999 Section 38-3
A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-3(1)(c)
A New Tax System (Goods and Services Tax) Act 1999 Section 38-4
Reasons for decision
A supply of food is GST-free under section 38-2 of the GST Act if it satisfies the definition of food in section 38-4 of the GST Act and it does not come within any of the exclusions listed in section 38-3 of the GST Act.
Food is defined in paragraph 38-4(1)(a) of the GST Act to include food for human consumption (whether or not requiring processing or treatment). Your cake products satisfy the definition of food in section 38-4 of the GST Act because they are food for human consumption.
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). Item 20 in Schedule 1 (Item 20) relates to 'Bakery products' and includes cakes, slices, cheesecakes, pancakes, waffles, crepes, muffins and puddings.
Since cakes are specifically listed in Item 20, then the supplies of your cake products will not be GST-free. As you are making supplies of goods that are not GST-free under section 38-4 of the GST Act, the supplies of your cake products will be taxable supplies.