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Ruling

Subject: GST and food

Questions

Will your supply of uncooked and frozen Product A be subject to GST?

Is your supply of cooked and unfrozen Product A subject to GST?

Is your supply of Product B subject to GST?

Answers

No.

No.

No.

Relevant facts and circumstances

You are registered for GST.

You are to sell a new food product (Product A).

Product A will be sold, uncooked and frozen in retail outlets.

You already sell Product A cooked, unfrozen and refrigerated to third parties.

You also sell a product known as Product B that is made from the same ingredients as Product A. Product B can come in different shapes.

Product B has a filling at its centre.

Product B is sold cooked, unfrozen and refrigerated in retail outlets.

Both Product A and Product B are not marketed by you as prepared meals.

Relevant legislative provisions

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

Section 13-10

Section 38-2

Section 38-3

Section 38-4.

Reasons for decision

Will your supply of uncooked and frozen Product A be subject to GST?

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) 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 Product A will be sold in retail outlets as food for human consumption and consequently can be treated as food for human consumption.

Your Product A 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 Product A:

· food marketed as a prepared meal (Item 4), and

· bakery products, in particular pastry products covered by Items 22 to 25 of Schedule 1.

Item 4 of Schedule 1

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, Product A is not marketed by you as a prepared meal and do not compete against meals supplied by a take-away or restaurant. Given this, Product A does not fall within Item 4.

Items 22 to 25 of Schedule 1

Pastry products, such as pies, pasties, sausage rolls, pastries and pastizzi are specifically included in Schedule 1. Clause 2 of Schedule 1 operates to ensure that these items are subject to GST regardless of whether they are supplied hot or cold, or require cooking, heating, thawing or chilling prior to consumption.

There are a number of products that incorporate pastry as their outer layer and are not specifically included in Schedule 1. These products may be subject to GST by virtue of paragraph 38-3(1)(c) of the GST Act which refers to food of a kind specified in the third column of the table in clause 1 of Schedule 1.

Hence, in considering if Product A is a food of a kind, it is relevant to look at the food products listed in Items 22 to 25 of Schedule 1.

The Macquarie Dictionary (5th Edition) defines pastry to be:

1. food made of paste or dough, as the crust of pies, etc.

2. articles of food of which such paste forms an essential part, as pies, tarts, etc.

In the case of Product A, its layer cannot be considered as being a layer equivalent to pastry given the layer is neither a paste nor dough.

Given this, the supply of Product A is not exempted from being a food for human consumption under 38-3 of the GST Act and hence, it is a food as defined by subsection 38-4(1) of the GST Act. Consequently, its supply would be GST-free.

Is your supply of cooked, unfrozen Product A subject to GST?

In this case, it is not relevant that Product A has been cooked and is unfrozen. Hence, as for the reasons given in question 1, the cooked and unfrozen Product A is not excluded from being GST-free by section 38-3 of the GST Act. As a result, it is a food as defined by subsection
38-4(1) of the GST Act and its supply would be GST-free.

Note that in determining the GST treatment of food products, it does not matter who buys your food. The purchaser can be a wholesaler, a restaurant or cafe, an individual or any type of business entity.

Is your supply of Product B (all shapes) subject to GST?

As for the reasons given in question 1 and question 2, the cooked and unfrozen Product B is not excluded from being GST-free by section 38-3 of the GST Act. As a result, it is a food as defined by subsection 38-4(1) of the GST Act and its supply would be GST-free.