Edited version of your private ruling

Authorisation Number: 1012454217084

Ruling

Subject: GST and banana bread

Question 1

Is the banana bread produced by you subject to GST when sold to customers?

Answer

Yes.

Relevant facts and circumstances

· You are registered for GST.

· You run a bakery enterprise.

· You bake a product which you call 'banana bread'.

· Your banana bread comes in various sizes.

· You have provided a sample of the wrapping for the different sizes.

· The larger size is sliced and the slices are individually wrapped and sold to another retailer.

· The labelling on the small sized wrapping of your banana bread provides the following ingredients:

o Bananas XX%

o Wheat flour (thiamine)

o Sugar

o GM free canola oil

o Light sour cream

o Egg

o Baking power

o Baking soda

o salt

· The labelling on the wrapping of your banana bread also provides the following nutritional breakdown per 100 grams:

Energy 1,380 kJ

Protein 5.1 grams

Fat, Total 13 grams

- Saturated 2.2 grams

Carbohydrate 46.9 grams

- Sugars 26.6 grams

Sodium 206 milligrams

· The labelling on the medium sized wrapping of your banana bread provides the following ingredients:

o Bananas YY%

o Wheat flour (thiamine)

o Sugar

o GM free canola oil

o Light sour cream

o Egg

o Baking power

o Baking soda

o salt

· The labelling on the large sized wrapping of your banana bread also provides the following nutritional breakdown per 100 grams:

Energy 1,350 kJ

Protein 5.0 grams

Fat, Total 13.6 grams

- Saturated 2.2 grams

Carbohydrate 46.0 grams

- Sugars 26.0 grams

Sodium 202 milligrams

· There are no fillings or glazes applied after baking.

· You refer to the Australian GST Guide produced by CCH, in particular paragraph 50-090 covering bakery products.

· You contend that the main way that banana bread is served for consumption is like any bread, like the way toast is served i.e. with butter and is mainly consumed as an alternate to toast.

· You contend that your banana bread is GST free as it does not come within any of the exclusions listed in section 38-3 of the GST Act, in particular 38-3(1)(c)

· You contend that your banana bread is not covered by items 20 nor 27 in Schedule 1 of the GST Act.

· You have based your conclusions on the way the bread is manufactured and the way that it has always been marketed and that the Australian GST Guide produced by CCH confirms your view.

Relevant legislative provisions

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

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

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

Schedule 1 of A New Tax System (Goods and Services Tax) Act 1999 (Item 20)

Reasons for decision

GST is payable on taxable supplies. Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you make a taxable supply if:

· you make the supply for consideration

· the supply is made in the course or furtherance of an enterprise that you carry on

· the supply is connected with Australia, and

· you are registered, or are required to be registered for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

Your supply of banana bread satisfies all of the four positive tests above, and is not input taxed. We now need to consider whether the supply of your banana bread will be GST-free under Division 38 of the GST Act.

A supply of food is GST-free under section 38-2 of the 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.

Food is defined in paragraph 38-4(1)(a) of the GST Act as 'food for human consumption (whether or not requiring processing or treatment)'. The banana bread you supply satisfies the definition of food in section 38-4 of the GST Act, because it is food for human consumption.

However, 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).

The category of food from Schedule 1 that is of particular relevance to banana bread is 'bakery products'. Item 20 in Schedule 1 (Item 20), from the category 'bakery products' specifies that cakes, slices, cheesecakes, pancakes and waffles are not GST-free. Item 27 in Schedule 1 (Item 27), from the category 'bakery products', specifies that bread (including buns) with a sweet filling or coating is not GST-free.

The phrase 'of a kind' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that term. The Macquarie Dictionary¹ (dictionary) does not define the entire phrase 'of a kind'. However, it defines the word 'kind' to mean:

'1. A class or group of individuals of the same nature or character, especially a natural group of animals or plants. 2. Nature or character as determining likeness or difference between things: things differing in degree rather than in kind. 3. A person or thing as being of a particular character or class: he is a strange king of hero. 4 ...'

Accordingly, something will be 'of a kind' if it is of the same nature or character (possessing the same distinguishing qualities) as the thing or group in question.

The dictionary defines bread as 'a food made of flour or meal, milk or water, etc., made into a dough or batter, with or without yeast or the like, and baked'.

The dictionary defines cake as 'a sweet baked food in loaf or layer form, made with or without shortening, usually with flour, sugar, eggs, flavouring, usually with baking powder or soda, and a liquid'.

From these definitions it is considered that your banana bread is a cake product. The ingredients for your banana bread are similar to those outlined in the definition of the term 'cake'.

Accordingly, banana bread products are food of the same class as cake and are therefore considered to be food of a kind specified in Item 20. As such, your supply of banana bread is not GST-free under section 38-2 of the GST Act.

As a consequence, your supplies of banana bread are taxable supplies.

Further information about GST and food is available on our website www.ato.gov.au , which has a GST food classification decision tool, and links to relevant issues registers and publications.

¹ The Macquarie Dictionary Online © Macquarie Dictionary Publishers Pty Ltd.