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Ruling

Subject: dried food products

Question

Is the supply of a dried food product GST-free?

Answer

Yes

Relevant facts:

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

You carry on an enterprise of supplying dried food products which are for the preparation of a meal.

The meal is prepared by adding water to the dried food product and cooking for half an hour.

The dried food product is made from cereals/grains mixed with spices and dehydrated vegetables.

The product is dried and uncooked with a shelf life of a year.   

You advised that the dried food products do not require refrigeration or freezing for their storage.

Reasons for decision

A supply of food is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Food is defined in section 38-4 of the GST Act. Under section 38-2 of the GST Act a supply of food is GST-free. However, food that is described in section 38-3 of the GST Act is not a GST-free food.

The term food is defined in section 38-4 of the GST Act and includes amongst other things any of the following or any combination of the following:

· food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act)

· ingredients for food for human consumption (paragraph 38-4(1)(b) of the GST Act) and

· goods to be mixed with or added to food for human consumption (including condiments, spices, seasoning, sweetening agents or flavourings) (paragraph 38-4(1)(e) of the GST Act).

In this case the dried food products satisfy the meaning of food under paragraph 38-4(1)(a) of the GST Act as it is a dried food for the preparation of a meal for human consumption. Next we need to consider whether the dried food products are the type of food described in subsection 38-3(1) of the GST Act.

Subsection 38-3(1) of the GST Act provides that a supply of food is excluded from being GST-free if it is a supply of, amongst other things:

· food for consumption on the premises from which it is supplied, or

· hot food for consumption away from those premises, or

· food of a kind specified in Schedule 1 of the GST Act, or

· food that is a combination of one or more foods at least one of which is food of such a kind.

Based on information provided, the dried food products are not a food for consumption on the premises from which they are supplied or hot food for consumption away from those premises. The dried food product consist of cereals/grains and require cooking before consumption. They are dried and are normally stored on the shelf.

Therefore we need to determine whether the dried food products are food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Food listed under an item in Schedule 1 is excluded from being GST-free by section 38-3 of the GST Act.

The dried food products are for the preparation of a meal. Therefore we need to consider Items 1 to 7 in Schedule 1 which relates to prepared food and are intended to cover food that directly compete against take-aways and restaurants food. Based on the information provided, we consider item 4 of Schedule 1 (Item 4) may be relevant to the dried food product. Item 4 is about food marketed as a prepared meal, but not including soup.

When considering food under Item 4 we need to consider conditions outlined in clauses 2 and 3 of Schedule 1 of the GST Act. Clause 2 of Schedule 1 provides when considering prepared food under items 1 to 7, it does not matter whether the food is sold hot, cold or frozen or require cooking, heating, thawing or chilling prior to consumption. Clause 3 of Schedule 1 provides that Item 4 only applies to food that requires refrigeration or freezing for its storage.

Prepared Meals

The Australian Taxation Office view on prepared meals is provided in the public ruling "Prepared Food of the Food Industry Partnership (Goods and Service Tax Industry Issue)". We enclose a copy for your reference.

The term 'prepared meal 'referred to in Item 4 is not defined in the GST Act and therefore takes its ordinary meaning.

'Meal' is defined in The Macquarie Concise Dictionary, 2001, revised 3^rd edition Macquarie Library Pty Ltd NSW (Macquarie Dictionary) as:

· one of the regular repasts of the day, as breakfast, lunch, or dinner.

· the food eaten or served for a repast.

This definition could be applied to a single food item or to a meal consisting of several food items.

The Macquarie Dictionary defines 'prepare' in relation to food as "to get ready for eating, as a meal, by due assembling, dressing or cooking".

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

Included in this category (according to the EM at paragraph 1.33) are things such as:

prepared meals such as curry and rise dishes, mornay's 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 dinned including vegetables and low fat dietary meals).

Paragraph 1.34 of the EM provides examples of food items that are not considered to be prepared meals:

· frozen vegetables

· uncooked pasta products

· fish fingers

· baby food, baked bens, spaghetti and Irish stew that do not require refrigeration or freezing.

· In determining whether food is marketed as a 'prepared meal' the activities of the seller are relevant. Consideration is given to the following:

· the name of the goods

· the price of the goods

· the labelling on any containers for the goods

· literature or instructions packed with the goods

· how the goods are packaged

· how the goods are promoted or advertised and

· how the goods are distributed.

Dried food product

The dried food products have been described as food products for the preparation of a meal. The products are cooked after adding water to the products. Therefore the dried food products do not compete with take-away or restaurant food.

The dried food products are packed and stored on a shelf with a shelf life of a year. The dried food products do not require refrigeration or freezing for its storage. Therefore the dried food product do not satisfy clause 3 of Schedule 1 to the GST Act and is therefore not a prepared meal under Item 4. The dried food product are not food of a kind specified in Schedule 1 of the GST Act and it is therefore GST-free under section 38-2 of the GST Act.