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Ruling

Subject: GST and pureed food

Questions

1. Should pureed food, that would normally attract GST were it not provided in a pureed form, be treated differently for GST purposes in its own right because:

· of the nature of the product (not a grocery item for sale to the general public; not sold to be eaten by itself and not sold to be eaten without the direction of healthcare professionals)

· the product is not marketed as a prepared meal and does not compete directly or otherwise against take-aways and restaurants

· the product is neither aesthetically a prepared meal nor presented as a prepared meal?

2. Is an exemption of GST available for a food product on the basis of its health care application?

3. Should pureed products that might attract an exemption of GST for the reasons in question 1 or 2 above or for other reasons still be subject to GST in the normal manner as their non-pureed equivalents because the end user cannot be identified (ie for supplies to distributors)?

Answers

1. Pureed food (like any other type of food) must satisfy the relevant legislative provisions from the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) before its supply can be treated as being GST-free. The type of purchaser (be it the general public or a business), how the food is consumed or whether the food must be eaten under the direction of healthcare professionals plays no part in determining the GST status of the food under these provisions.

The packing and marketing of food can play a role in determining a food's GST status, especially in the case of prepared meals. Please refer to Reasons for Decision as to what constitutes a prepared meal.

Given this, your supply of your pureed food products, including the complete meals and cakes, satisfy the legislative provisions of the GST Act to allow their supply to be GST-free as food for human consumption.

2. The GST Act (or any other Act) does not determine the GST status of a food or provide a GST exemption based on its health care application. Note however that the supply of beverages (or ingredients for beverages) that are marketed principally as food for infants or invalids are GST-free.

3. The GST Act (or any other Act) does not determine the GST status of a food based on the end user of the food or whether the end user is known or not known to the supplier.

Relevant facts and circumstances

You are registered for goods and services tax (GST).

You supply frozen pureed food.

You cannot be absolutely certain who the end consumers of your food are.

You have supplied a list of the different types of pureed food you supply and these include amongst other things complete meals and cakes.

The complete meals are products having more than one component for example meat and vegetables.

The food is intended for people who have trouble swallowing.

None of your products are sold as individual meals but by the carton.

Your products only need to be thawed and reheated.

Relevant legislative provisions

All references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act):

Section 13-10

Section 38-2

Section 38-3

Section 38-4.

Reasons for decision

1. Should pureed food, that would normally attract GST were it not provided in a pureed form, be treated differently for GST purposes in its own right because:

· of the nature of the product (not a grocery item for sale to the general public; not sold to be eaten by itself and not sold to be eaten without the direction of healthcare professionals)?

· the product is not marketed as a prepared meal and does not compete directly or otherwise against take-aways and restaurants?

· the product is neither aesthetically a prepared meal nor presented as a prepared meal?

The pureeing of food does not necessarily imply that it will be GST-free if, in its original state, it is taxable. The pureed food must still satisfy the relevant legislative requirements from the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) that would allow the supply of a food to be GST-free.

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.

The definition of food in section 38-4 of the GST Act includes food for human consumption, whether or not requiring processing or treatment. Your pureed food products are intended to be eaten by people who have trouble swallowing and consequently can be treated as food for human consumption.

Your supply of the pureed food products does not fall within any of the exclusions in section 38-3 of the GST Act except possibly paragraph 38-3(1)(c). 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) or is a food that is a combination of one or more foods at least one of which is food of such a kind.

Schedule 1 includes the following food items that may be of relevance when considering the GST treatment of your supply of some of the pureed food products:

· food marketed as a prepared meal, but not including soup (Item 4 of Schedule 1), and

· cakes, slices and cheesecakes (Item 20 of Schedule 1).

Item 4 of Schedule 1 (Item 4)

Some of your products are a complete meal, having different food components. For GST purposes this type of meal is defined as a prepared meal. Consequently, it is necessary to determine if these complete meals fall within Item 4.

The ATO view on prepared meals is provided by issue 5 of the Food Issues Register (Issue 5 - available from the ATO website www.ato.gov.au). Issue 5 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 (clause 3 of Schedule 1); and

· are marketed as a prepared meal.

· Issue 5 further provides some examples of prepared meals and includes:

· 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; and

· fresh or frozen complete meals (for example, single serves of a roast dinner including vegetables and low fat dietary meals).

In your case, we consider that once pureed, your complete meal products loose their character to that of a meal supplied by a take-away or restaurant and as such, do not directly compete against these types of businesses. Your complete meals are also not marketed as prepared meals.

Given this, your complete meal products do not fall within Item 4.

Item 20 of Schedule 1 (Item 20)

The terms cakes and slices are not defined in the GST Act and are therefore afforded their ordinary meaning as provided by the Macquarie Dictionary (5th edition).

Cakes and slices

Cake is defined 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 definition of slice is 'any of several cakes or biscuits cooked or formed as a thin slab and cut into rectangular pieces'.

Give these definitions, your pureed cakes do not have the necessary characteristics to be covered by Item 20.

Hence, as your supply of the pureed food products do not fall within any of the exclusions in section 38-3 of the GST Act, your supply of the pureed food products (including the complete meals and cakes) are GST-free as food under section 38-2 of the GST Act.

Note that the purchaser of the food or whether the food must be eaten under the direction of healthcare professionals plays no part in determining the GST status of the food under the above legislative provisions.

2. Is an exemption of GST available for a food product on the basis of its health care application?

The GST Act (or any other Act) does not determine the GST status of a food or provide a GST exemption based on its health care application. Note however that the supply of beverages (or ingredients for beverages) that are marketed principally as food for infants or invalids are GST-free (Item 13 of clause 1 of Schedule 2 of the GST Act).

3. Should pureed products that might attract an exemption of GST for the reasons in question 1 or 2 above or for other reasons still be subject to GST in the normal manner as their non-pureed equivalents because the end user cannot be identified (ie for supplies to distributors)?

The GST Act (or any other Act) does not determine the GST status of a food based on the end user or whether the end user is known or not known to the supplier. Consequently, your supply of the pureed food products remains GST-free regardless of the end user.