Edited version of your private ruling

Authorisation Number: 1012536937570

Ruling

Subject: food classification

Question

Are the following foods GST-free?

Advice

Relevant facts:

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

· You carry on a business of supplying food products to the customers' premises.

· You seek GST advice on your food products and you provided the following information:

· The fruits are dried natural fruits and are not frozen nor have been treated in a cooking process. The fruits are not crystallised, glazed or drained.

· The mixed nuts contain only raw nuts.

· The mixed fruit nuts contain dried fruits and raw nuts.

· The nuts and fruits are pre-packed and sealed in clear containers.

· The yoghurt is not a beverage. The yoghurt requires refrigeration for storage and is not frozen or soft serve yoghurt.

· The salads require refrigeration for storage and are served cold.

· The salads are made fresh to order and are packed in clear containers.

· The ingredients for the muesli are oats, apples, juices, dried fruits, honey, and raw nuts. The muesli is packed in clear containers and requires refrigeration for storage.

· The soups are packed in clear containers and require refrigeration for storage.

Reasons for decisions

A supply of a product 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) and ingredients for food for human consumption (paragraph 38-4(1)(b) of the GST Act).

Your food products satisfy the definition of food as they are food for human consumption whether or not requiring processing or treatment and ingredients for food for human consumption.

However, subsection 38-3(1) of the GST Act specifies some foods that are excluded from being GST-free. The subsection states:

A supply is not GST-free under section 38-2 if it is a supply of:

(a) *food for consumption on the *premises from which it is supplied; or

(b) hot food for consumption away from those premises; or

(c) food of a kind specified in the third column of the table in clause 1 of Schedule 1, or food that is a combination of one or more foods at least one of which is food of such a kind; or

(d) a *beverage (or an ingredient for a beverage), other than a beverage (or ingredient) of a kind specified in the third column of the table in clause 1 of Schedule 2; or

(e) food of a kind specified in regulations made for the purposes of this subsection.

* denotes a defined term in the GST Act

The food products do not contain hot foods and are delivered to the customers' premises. Therefore, paragraph 38-3(1)(c) of the GST Act may be relevant to your food products.

Paragraphs 38-3(1)(c) of the GST Act - Food of a kind specified in Schedule 1

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 specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1) or it is food consisting of a combination of one or more foods with at least one of which is food specified in Schedule 1.

Based on the information provided, the following items in Schedule 1 may apply to your food products:

Item 4 of schedule 1 (item 4) - Salads

Item 4 lists foods that are marketed as a prepared meal, but not including soups.

Soups

Your soup products are specifically excluded from being a prepared meal under item 4 and therefore are not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

Salads

Salads that have been marketed as a prepared meal are excluded from being GST-free by paragraph 38-3(1)(c ) of the GST Act.

A prepared meal under Item 4 must satisfy the conditions outlined in clauses 2 and 3 of Schedule 1 of the GST Act. Clause 2 of Schedule 1 provides prepared food can be supplied hot, cold or frozen or require cooking, heating, thawing or chilling prior to consumption and clause 3 of Schedule 1 provides that prepared food requires refrigeration or freezing for its storage.

We consider that your salads satisfy both clauses 2 and 3 of Schedule 1 as the salads are supplied ready for consumption and they require refrigeration for storage. Now we have to consider whether your salads are marketed as prepared meals.

The Australian Taxation Office (ATO) view on prepared meal is outlined in Goods and Service Tax Industry Issue - Food partnership Prepared Food (Prepared Food) ruling and paragraph 2 of the ruling provides that the term "prepared meal" is intended to cover a range of food products that:

· directly compete against takeaways and restaurants

· require refrigeration or freezing for storage, and

· are marketed as a prepared meal.

Paragraph 12 of the ruling provides that consideration must be given to the suppliers' activities when deciding on whether a food is marketed as a prepared meal. The considerations are:

(a) the name of the goods;

(b) the price of the goods;

(c) the labelling on any containers for the goods;

(d) literature or instructions packed with the goods;

(e) how the goods are packaged;

(f) how the goods are promoted or advertised; and

(g) how the goods are distributed

Considerations must be given to the suppliers' pricing, advertising, promotions, packaging, etc of the foods. The Prepared Food ruling provides an example of a food marketed as a prepared meal. Example 2 in the Prepared Food ruling provides a packet containing fish and sauce, combined with pasta is a prepared meal. Paragraphs 15 and 16 of the Prepared Food ruling state:

15. Also in the frozen food section of the supermarket is a packet of fish and sauce, combined with pasta. The directions on the packet are to either microwave on high for four minutes, stir and then microwave for a further two minutes or to bake in the oven for 20 minutes, after which time the product is ready to eat.

16. In this instance, the fish and sauce, combined with pasta is considered to be a 'prepared meal'.

In addition the Goods and Service Tax Industry Issue - Detailed Food List (Detailed Food List) ruling provides other examples of prepared meals. It states

The Detailed Food List ruling provides that curry with rice or seafood in sauce with pasta and/or vegetables packed in a container from which the food can be eaten, are prepared meals. These are examples of prepared meals that can directly compete with takeaway and restaurant foods.

Based on the above, foods containing meat with pasta or curry with rice or seafood with pasta (where supplied hot, cold or frozen or require cooking, heating, thawing or chilling prior to consumption) are prepared meals under item 4 when supplied in a container ready for consumption. Foods where the curry and rice are packed in separate containers and requires assembly before consumption are not a prepared meal for GST purposes.

In your case, the meat with noodles salads are packed in a container and supplied ready for consumption. These foods are similar to prepared foods such as curry with rice or seafood in sauce with pasta and/or vegetables packed in containers and can directly compete against takeaway or restaurant foods Therefore they are food of a kind listed under item 4 and are excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

Other salads

The salads are not marketed as a prepared meal. Although the salad food contain ingredients such as salads, cheese, crouton, bacon, olive oil and salt with dressings packed in containers, these foods do have the necessary balanced components to be considered as a prepared meal. These salads are not complete meals and they do not directly compete against takeaways and restaurants foods as they are not foods like meat with pasta or curry with rice. Therefore, the food is not food of a kind listed under item 4 and are not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act

Item 5 of Schedule 1 (item 5) and combination of foods

The ATO view on platters of foods is outlined the Prepared Food ruling. Paragraphs 24 to 26 of the ruling states:

24. Clause 1, Item 5 of Schedule 1 of the GST Act operates to subject platters and other similar arrangements of food to GST. Therefore, fruit and cheese and cheese and cabanossi platters will be subject to GST.

25. The term 'platter' is not defined in the legislation and therefore its ordinary meaning is to be adopted. 'Platter' is defined in the Macquarie Dictionary to mean:

1. a large shallow dish, commonly oval, for holding or serving meat etc.

26. Item 5 of Schedule 1 is referring to platters and arrangements of food that can be uncovered and placed on the table ready for serving (for example, as a catering product at parties, BBQs and so forth).

Therefore foods listed under item 5 are arrangements of foods that are placed on a platter ready for serving. However, paragraph 29 of the Prepared Food ruling provides item 5 does not apply to arrangement of foods where the packed foods can be sold individually.

You advised that the foods are individually packed and sealed and then packed in a box for delivery. Therefore the foods in the box are not food of a kind listed under item 5.

In addition you advised that the foods in the box are a combination of meat, dried fruits and raw nuts. As all these foods are not listed in Schedule 1 of the GST Act, therefore, the combination of foods in the box are not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

Please note: However, if one of the foods in the food combination is listed in Schedule 1 (for example roasted or salted nuts under item 16), the foods combination is excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

Item 16 of Schedule 1 (item 16)

Item 16 lists seeds or nuts that have been processed or treated by salting, spicing, smoking, or roasting, or in any other similar way. Therefore, item 16 will apply to nuts that have been treated by a process of salting, spicing, smoking or roasting. The smoked nuts, roasted nuts and salted nuts, are food of a kind listed under item 16 and are therefore excluded from being GST-free by paragraph 38-3)1)(c) of the GST Act.

The raw nuts that have not been treated by a process of salting, spicing, smoking or roasting, these nuts are not food of a kind listed under item 16 and are therefore not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

Dried fruits

The fruits are dried natural fruits which have not been treated to form crystallised, glazed or drained fruits. The dried fruits are not frozen nor have been treated in any cooking process. Therefore the dried fruits are not food of a kind listed under items 12, 15, 18 and 29 of Schedule 1.

As the dried natural fruits are not foods of a kind listed in Schedule 1, they are therefore not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

Mix dried fruit and raw nuts

The mix fruit and nuts contain raw nuts and dried fruits and these foods are not food of a kind listed in Schedule 1. Therefore, the mixed dried fruit and raw nuts is a food combination that is not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

Yoghurt

The yoghurt is not supplied as a beverage. The yoghurt requires refrigeration for storage but is not supplied as frozen or soft served (item 29 of Schedule 1). Therefore the yoghurt is not food of a kind specified in Schedule 1 of the GST Act and is not excluded from being GST-free by paragraph 38-3(1)(c ) of the GST Act.

Muesli

Item 11 of Schedule 1 to the GST Act (Item 11) specifies 'food known as muesli bars or health food bars, and similar foodstuffs'. The ATO view on foods listed in item 11 is outlined in GSTD 2008/2. We enclose a copy for your reference.

Paragraphs 8 to 13 of GSTD 2008/2 outlines the criteria for foods listed under item 11. In particular, the physical presentation of the muesli must be in the form of a bar (for ease of eating) and the texture of the bar varies from chewy to crunchy.

Your muesli contains the same ingredients as muesli bars and the muesli is packed in clear containers and ready to serve. The muesli requires refrigeration for storage.

Although your muesli has similar ingredients to a muesli bar, it does not have the physical presentation of a muesli bar (such as in the form of a bar and chewy or crunchy texture). Therefore your muesli is not food a kind listed under item 11 and is not excluded from being GST-free by paragraph 38-3(1)(c ) of the GST Act.

In summary, where a food or a combination of foods (in which one of the foods in the combination) is listed under an item in Schedule 1, the foods are excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

Foods or a combination of foods where they are not listed in Schedule 1, these foods are GST-free.