Edited version of your private ruling

Authorisation Number: 1012529580456

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Ruling

Subject: GST and food

Question

Will your sale of the food products (Products) be subject to goods and services tax (GST)?

Answer

Yes.

Relevant facts and circumstances

· You are registered for GST.

· You are to supply the Products to retail outlets.

· Each product:

o has a meat component and comes with either vegetables, rice or noodles

o is pre-sauced and states on the labelling that other ingredients can be added

o will be sold in a container

o requires refrigeration

o is intended to be displayed and sold from the wet salad section in the retail outlets

o provides heating instructions if required by the purchaser

o will be marketed as ready to eat salad or a meal accompaniment

o are not consumed on the premises from where they are sold.

· None of the labels state that the product is a prepared meal or that the product is a salad.

· Each product weighs about the same as a pre-packaged prepared meal.

· No eating implements are provided.

Relevant legislative provisions

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

Section 9-5

Section 38-2

Section 38-3

Section 38-4.

Reasons for decision

A supply is GST-free as food under section 38-2 of the GST Act if what is being supplied 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)). In your case, you are to sell the Products to retail outlets as food for human consumption. Hence your Products can be treated as food under section 38-4 of the GST Act.

The Products do 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 Products:

· food marketed as a prepared meal, but not including soup (Item 4 of Schedule 1).

Note that there are no other food items in Schedule 1 that are relevant to your Products.

What is a prepared meal

The ATO view on prepared meals (often referred to as complete meals) is provided by Issue 5 of the Food Issues Register (Issue 5) which is available from the ATO website and has the status of a public ruling. 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).

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.

Hence, 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.

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 labelling 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.

It is now necessary to apply the three criteria listed in Issue 5 to determine if your Products are prepared meals.

Directly compete against take-aways and restaurants

All of the Products are of a type that could be purchased from a take-away or restaurant as a meal so this requirement is satisfied.

Require refrigeration or freezing for storage

All the Products require refrigeration for storage so this requirement is also satisfied.

Marketed as prepared meals

All the Products have a combination of ingredients (a meat component with vegetables, noodles or rice) that would be found in a prepared meal. Also, the Products will be marketed as ready to eat salads as well as meal accompaniments.

The labelling provides information on adding other ingredients however the ingredients listed on the labelling are added to provide further flavour and not to add substance or balance to the Products.

Each Product is sold pre-sauced which is not common in supermarket bought salads that are not intended for immediate consumption. Also, the name of the Product and the absence of the word salad on the labelling also convey a food product that is more designed as a quick ready to eat meal. The price and weight of each Product is also comparable with pre-packaged prepared meals.

One of the Products states that it is perfect for use in certain other products but the Product is not specifically labelled as a filling for these other products and could be eaten as is.

The Products are to be displayed and sold from the wet salad section of retail outlets and there is no statement on any of the labels that the Products are being sold as prepared meals. There are no utensils provided with any of the Products. However, we consider that the overall intention and marketing of the product is that it is a prepared meal.

Prepared meals

Weighing up all these differing factors present in each Product and in their labelling, we consider that the Products are properly characterised as a taxable prepared meal rather than as a GST-free salad.

Given that all three criteria listed in Issue 5 are satisfied, the Products can be considered as prepared meals and hence will be captured by Item 4 of Schedule 1. Consequently, the supply of the Products will be taxable under section 9-5 of the GST Act.