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Ruling

Subject: GST and food

Question

Will your supply of the food product be GST-free under section 38-2 of A New Tax System (Goods and Services Tax) Act 1999?

Answer

Yes.

Relevant facts and circumstances

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

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

The Product consists of common food items.

The Product needs to be refrigerated before being sold.

The Product's ingredients will be approximately half cooked before the product is sold. The cooking process will then be finished by either microwaving or by using a heat source such as an oven. However, it is not necessary to eat the Product hot once the cooking process is finished.

The Product does not come with any eating utensils.

The Product will not be marketed by you as a prepared meal. The labelling also states that the Product can be served with other food items.

It is your intention to introduce the Product as a way to allow a quick and easy method of adding certain food to a meal.

Relevant legislative provisions

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

Section 38-2

Section 38-3

Section 38-4.

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

Your Product 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 item that may be of relevance when considering the GST treatment of your supply of the Product:

· food marketed as a prepared meal (Item 4 of Schedule 1).

Prepared meals

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).

Issue 5 further provides that that for food to be regarded as a prepared meal in accordance with Item 4 of Schedule 1, the food needs to be supplied assembled and dressed (if applicable). In addition, if the food is cooked or partly cooked and is to be served hot, it should only need heating, which may include completion of the cooking process, to be ready for consumption. Heating will be interpreted to mean warmed in the microwave oven, convection oven, frying pan, wok or saucepan.

In this case, it will not be necessary to eat the Product hot once the cooking process is finished. Further to this, the Product has ingredients in such a combination that the Product cannot be considered as being a complete meal similar to the products sold by a take-away or restaurant.

Finally, although the Product will require refrigeration before being sold and will also require further cooking before consumption, it will not be marketed or labelled by you as a prepared meal. The labelling also suggests that the product could be tried with other food items.

Given these points, the Product does not fall within Item 4 of Schedule 1.

As a result, the Product will not be exempted from being a food for human consumption under 38-3 of the GST Act and consequently, it will be a food as defined by subsection 38-4(1) of the GST Act. Hence, its supply will be GST-free.