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Edited version of your private ruling
Authorisation Number: 1012512680974
Ruling
Subject: Fruit bread
Question
Is the supply of fruit bread GST free?
Answer:
No
Relevant facts:
· You are registered for the goods and services tax (GST).
· You carry on an enterprise of wholesaling fruit bread.
· The ingredients in the fruit bread are fruit, flour, eggs, sugar, baking soda, oil, cream, baking powder and salt
· The baking process for the fruit bread is as follows:
1. Mixing all ingredients in a mixing bowls
2. Deposit the fruit bread mix into tins
3. Put tins into oven and bake
4. Take tins out of the oven, cool down and tip the breads into cartons, put into crates
5. Flow wrap the bread, putting labels on and pack the breads into cartons
· The fruit bread does not have sweet filling or coating applied after baking
Reasons for decision
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 section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act). The fruit bread is food for human consumption and therefore satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act.
However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1).
Based on the description and ingredients of the fruit bread, we consider the relevant items listed in Schedule 1 are Item 20 in Schedule 1 (item 20) and Item 27 in Schedule 1 (item 27). Foods listed under item 20 are 'cakes, slices, cheesecakes, pancakes, waffles, crepes, muffin and puddings and foods listed under item 27 are bread (including buns) with a sweet filling or coating'. The foods listed under these items would include food of a kind specified under items 20 and 27 in Schedule 1.
Fruit Bread
As the fruit bread is not listed under items 20 and 27, we need to consider whether the fruit bread is food of a kind a cake under item 20 or a bread product under item 27.
The words "cakes" and "bread" as described in Schedule 1 is not defined in the GST Act and therefore they take on the ordinary meaning. The meanings of these words are defined in The Macquarie Concise Dictionary (3nd Edition) (Dictionary) as follows:
Cake
1. a sweet baked food in a loaf or layer form, made with or without shortening , usually with flour, sugar, eggs, flavouring, baking powder or soda …
3. to form into a cake or compact mass
4. to be formed into a cake or compact mass…
Bread
1. a food made of flour or meal, milk or water, etc. made into dough or batter with or without yeast or the like, and baked
Food of a kind specified in Schedule 1
The phrase 'of a kind' is also not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that term. The 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. In this case, we are going to look into the nature, character and ingredients for the fruits bread and determine where it is a kind of a cake or bread product.
Based on the above, it is considered that the fruit bread has the nature, character and ingredients of a cake product. Although the fruit bread is promoted as a bread product, you have advised that the ingredients in the fruit bread are fruit, flour, eggs, sugar, baking soda, oil, cream, baking powder and salt. The ingredients contain sugar and therefore the fruit bread is sweet. The other ingredients are eggs, baking soda, etc., which are essential ingredients for baking a cake. In addition, the fruit bread is made by mixing all ingredients in a bowl, deposit the mix into a tin for baking in the oven. Therefore, we consider the fruit bread is a cake and food of a kind listed under item 20. The fruit bread is therefore excluded being GST-free by paragraph 38-3(1)(c) of the GST Act.
Based on the ingredients and the baking process, we do not consider the fruit bread to be food of a kind of a bread product and therefore there is no requirement to consider the fruit bread under item 27. A bread product is made of flour, milk or water, etc. The flour and water are made into dough with or without yeast and then baked.