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Ruling

Subject: GST and the supply of certain foods

Question

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

Answer

Yes. Your supply is a GST-free supply of food under section 38-2 of the GST Act.

Relevant facts and circumstances

· You are a company.

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

· The product is supplied in a foil tray and is in a frozen state.

· The label advises that the product should be stored frozen at a temperature below minus 18 degrees and that there are no added preservatives.

· You advise that there is no other labelling on the product other than the label on the top of the foil container.

· The packaging on the pack provides instructions to 'Heat and Serve'. However the instructions on the advise that the food product be 'cooked' in a conventional oven only, to 170 degrees Celsius for 60 minutes.

· The instructions on the packaging of the single serve pack provides that the product be heated at 180 degrees Celsius for approximately 30 minutes if frozen or 18 minutes if thawed. The pack also provides instructions for heating in a microwave oven.

· You advise that the product is not a meal in itself, the intention of the product is that it be used as an accompaniment to a main meal.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 38-2.

A New Tax System (Goods and Services Tax) Act 1999 Section 38-3

A New Tax System (Goods and Services Tax) Act 1999 Section 38-4

A New Tax System (Goods and Services Tax) Act 1999 Schedule 1

Reasons for decision

Division 38 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) sets out the supplies that are GST-free. A supply of food is GST-free in accordance with section 38-2 of the GST Act, if it satisfies the definition of food in section 38-4 of the GST Act and it does not come within any of the exclusions in section 38-3 of the GST Act.

The meaning of food in section 38-4 of the GST Act includes food for human consumption (whether or not requiring processing or treatment). The products you supply are food for human consumption and therefore fall within the meaning of food in section 38-4 of the GST Act.

According to paragraph 38-3(1)(c) of the GST Act, a supply is not GST-free under section 38-2 of the GST Act if it is a supply of food of a kind specified in the third column of the table in Schedule 1 to the GST Act (Schedule 1).

The relevant item in Schedule 1 to consider in your case is Item 4.

Item 4 of Schedule 1 (Item 4) is food marketed as a prepared meal, but not including soup. Food which is marketed as a prepared meal (excluding soup) will therefore not be a GST-free supply.

Clause 3 of Schedule 1 provides that only food that requires refrigeration or freezing for its storage may be covered by Item 4.

Clause 2 of Schedule 1 provides that for the purpose of determining whether particular food is covered by Item 4, it does not matter whether it is supplied hot or cold, or requires cooking, heating, thawing or chilling prior to consumption.

Issue 5 of the Food Industry Partnership - Issues Register gives guidance as to the meaning of food marketed as a prepared meal.

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 (clause 3 of Schedule 1); and

· are marketed as a 'prepared meal'.

The term 'prepared meal' is not defined in the GST Act and will therefore bear its ordinary meaning.

The Macquarie Dictionary provides that 'meal' means "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 EM at paragraph 1.33 provides examples of prepared meals:

· prepared meals, such as 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).

All of the above meals, except for the sushi, are of a kind that are duly assembled, cooked or partly cooked and require heating and completion of the cooking process for them to be ready for consumption. Sushi is by its nature ready for consumption when it is duly assembled even though part of it is raw.

Therefore, for food to be regarded as a "prepared meal" in accordance with Item 4, 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.

Further to the above, 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 labeling 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.

In your case the food product you supply do advise on the packaging that they require refrigeration and freezing for storage at temperatures below minus 18 degrees Celsius, which satisfies the requirement in Clause 3 of Schedule 1 to the GST Act that states that only food that requires refrigeration or freezing for its storage can be classified as food marketed as a prepared meal.

For food to be regarded as a 'prepared meal' in accordance with Item 4, the food needs to be assembled, dressed, cooked or partly cooked.

The food product you supply contains certain food ingredients. Consequently, the food product you supply contain food which is assembled and dressed. In addition, the food product is cooked. Therefore, the products you supply contain assembled, dressed or cooked ingredients.

The products' packaging states the dishes require heating in a microwave or oven before serving.

As the products you supply are assembled, dressed or cooked prior to being supplied to consumers and no further assembly is required by the consumer after heating the products in a microwave or oven, the products exhibit the features of a prepared meal.

However, according to paragraph 38-3(1)(c) of the GST Act in order for food to be excluded from being a GST-free supply of food under Item 4, it must be food marketed as a prepared meal (but does not include soup).

The products' packaging states the dishes simply require heating before serving. The description of the heating instructions on the packaging alone suggest to consumers that the products are to be served on their own as prepared meals which do not require further assembly. However, the description of the product on the packaging and the activities of the seller need to be considered in their entirety to determine whether the products are marketed to consumers as prepared meals.

There is no description or suggestion on the product's packaging that states the products are suitable to be consumed as a main meal or on their own.

The imagery on the products' packaging shows the dishes served in a bowl with a small garnish.

The name of the product and description of the products on the products' packaging support the conclusion that you are not marketing the products as complete or prepared meals.

The name and description of the products must also be considered in order to determine whether you market the products as prepared meals. There is no description or suggestion on the products' packaging that states the products are suitable to be consumed as a main meal or on their own.

As the food product does not directly compete against take-aways and restaurants and taking into consideration the 'activities of the seller' indicators of a 'prepared meal' provided in the Food Industry Partnership-Issues Register regarding labelling, packaging and marketing, it is considered that neither are the food product marketed as a prepared meal. Thus the food product you supply does not satisfy the requirements of Item 4 of Schedule 1.

Therefore, your supply of the food product to your wholesalers is a GST-free supply of food under section 38-2 of the GST Act.