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Ruling

Subject: GST and food

Question

Will the supply of the food products be GST-free?

Answer

The supply of one of the products will be taxable. The supply of the remaining products will be GST-free.

Relevant facts and circumstances

You are registered for GST.

Several food products are to be manufactured and sold.

The products are made from plain white bread dough (not pizza dough) and each has a savoury filling incorporated into the dough before cooking.

Each product could be cut open if the customer wanted to put their own filling into the product.

One of the food products has the appearance of a product specifically listed under bakery products in the table in clause 1 of Schedule 1 to the A New Tax System (Goods and Services Tax) Act 1999 (Schedule 1) and will be marketed as this type of product.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

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 GST Act if it satisfies the definition of food in section 38-4 of the GST Act and it is not excluded by section 38-3 of the GST Act.

Food is defined in section 38-4 of the GST Act to include food for human consumption (paragraph 38-4(1)(a)) and ingredients for food for human consumption (paragraph 38-4(1)(d)).

In your case, you are to sell food products. These products satisfy the definition of food because they will be sold as food for human consumption. The products do not fall within any of the exclusions in section 38-3 of the GST Act except they may possibly be captured by 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 Schedule 1.

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

· Prepared food, in particular pizzas, pizza subs, pizza pockets and similar food.

· Bakery products.

Note that the only other food product in Schedule 1 that may be of relevance is bread but only if it has a sweet filling or coating. As your products are savoury and do not have a sweet coating, they will not be considered against this product in Schedule 1.

Pizzas, pizza subs, pizza pockets and similar food

Referring to the fact sheet GST and pizza rolls (available from the ATO website www.ato.gov.au) we consider there are three common characteristics of pizzas, pizza subs and pizza pockets. These are as follows:

· they cannot be cut and filled, do not need filling or topping added and are ready to eat

· they are made with dough (sometimes called 'pizza dough') with more oil and less yeast than traditional bread dough, and

· they have a topping or filling that is more than 30% of the product's depth.

In the case of your products, they are made from plain bread dough (not pizza dough), do not have a clearly defined filling (the filling being folded into the dough before cooking) and can be cut allowing the customer to put their own filling into the product if so required.

Schedule 1 also refers to products that are similar to these types of products. The fact sheet GST and pizza rolls provides that products are similar to pizzas, pizza subs and pizza pockets if they have:

· a general likeness to pizzas, pizza subs and pizza pockets, and

· all of the three common characteristics of pizzas, pizza subs and pizza pockets.

As previously stated, the products do not satisfy all three of the common characteristics of pizzas, pizza subs and pizza pockets. Hence, they are not similar to pizzas, pizza subs and pizza pockets and therefore not covered by Schedule 1.

Bakery products

One of the food products has the appearance of a product that is specifically listed under bakery products in Schedule 1 and will be marketed and sold as such.

Consequently, its supply will be subject to GST.

The remaining food products cannot be considered as the product specifically listed in Schedule 1. Hence, the supply of these products will be GST-free under section 38-2 of the GST Act.