Edited version of your private ruling

Authorisation Number: 1012593745245

Ruling

Subject: Breakfast snacks

Question

Is the supply of the breakfast snack food GST free?

Advice

Yes

Relevant facts:

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

· You carry on an enterprise of retailing breakfast snack food.

· The breakfast snack food consists of rolled cereal with fruit fillings. The rolled cereal is not in a bar form.

· The ingredients for breakfast snack food are cereals grains, fruit fillings, minerals and Vitamin C.

· The packaging described the food as a snack food made from cereal.

· The packaging promotes the food as a breakfast snack food.

· The packaging also provides nutritional information for the breakfast snack food such as energy, protein, fats, carbohydrate and dietary fibre.

· The label identifies the breakfast snack food as a breakfast food.

· The breakfast snack food is also available in a larger package and marketed as a breakfast cereal food.

· The breakfast snack food is not sold hot and is not for consumption on the suppliers' premises

Reasons for decision

A supply of food is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (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). As the breakfast snack is food for human consumption, they satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act.

However, section 38-3 of the GST Act specifies food that is not GST-free. The relevant paragraph which could apply to the breakfast snack food is paragraph 38-3(1)(c) of the GST Act. The paragraph 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).

The breakfast snack food consists of rolled cereal with fruit fillings. The packaging promotes the food as breakfast snack food. The label identifies the breakfast snack food as a breakfast food.

Based on the above information, we consider the item 32 in Schedule 1 (Item 32) may apply to the breakfast snack food. Item 11 of Schedule 1 (item 11) does not apply to the breakfast snack food as they are rolled cereals rather than a bar. Item 11 applies to foods known as muesli bars or health food bars and similar foodstuffs such as breakfast bars. The food listed in item 11 has a common characteristics which is they resemble a muesli bar in physical presentation, that is they are in a bar form. The breakfast snack is not a confectionery food or savoury snack. The breakfast snack is food made of cereals and is promoted as breakfast food with fruity taste rather than sweet snacks.

Item 32 is about food that consists principally of biscuits, cookies, crackers, pretzels, cones or wafers. The terms "biscuits, cookies, crackers, pretzels, cones or wafers" are not defined in the GST Act and will bear their ordinary meanings. The word "Biscuit" is defined in the Macquarie Concise Dictionary as:

"1. a stiff, sweet mixture of flour, liquid, shortening and other ingredients, shaped into small pieces before baking or sliced after baking. b. a savoury, unleavened similar mixture, rolled, sliced and baked crisp."

The breakfast snack food satisfies the meaning of biscuits as the breakfast snack food is made from flour and baked into rolled cereal and is baked crispy. Therefore, the breakfast snack food could be a biscuit food product listed under item 32.

However, Clause 5 of Schedule 1 (Clause 5) specifically excludes some food items from the meaning of biscuits goods listed under item 32. Clause 5 states:

None of the items in the table relating to the category of biscuit goods include:

(a) breakfast *food consisting principally of compressed, rolled or flattened cereal; or

(b) rusks for infants or invalids, or goods consisting principally of those rusks.

Therefore a breakfast food that is made principally of compressed, rolled or flattened cereals is not a biscuit food for GST purposes and is not listed under item 32.

The ingredients for the breakfast snack consist of principally of cereal grains with fruit fillings. The packaging promotes the food as a breakfast snack. In addition, the breakfast snack is also available in a larger package for the breakfast cereal market.

Therefore, we need to determine whether the breakfast snack is a snack food (like a biscuit) or a breakfast food. The explanation on "Food" for GST purposes is outlined in "GST Food Guide" publication (Nat 3338). Some food products may have alternate uses and the GST Food Guide provides some guidance for classifying the GST status of these foods. The food guide states:

Some GST-free food products have alternative non-food uses. The GST status of a product depends on whether it is a sale of:

§ food for human consumption

§ a non-food product.

The supplier must work out the type of sale.

You can work this out by considering the:

§ physical product

§ nature of the sale.

For example, you might decide a food product is for non-food use because the product is:

§ called something other than food

§ stored in conditions or containers that are not suitable for food

§ packaged in a non-food type package or container

§ labelled, invoiced or marketed as a non-food product

§ delivered in a way not suitable for food.

The breakfast snack is made of rolled cereal with fruity fillings. It is promoted as a breakfast snack food and not as a biscuit food. The nutritional information on the packaging is similar to the nutritional information for the breakfast cereal. Therefore, breakfast snack is a breakfast food.

Under Clause 5, the breakfast snack is not a biscuit food listed under item 32 for GST purposes.

As the breakfast snack is not listed in Schedule 1, the breakfast snack is not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.