Edited version of your written advice

Authorisation Number: 1012666747379

Ruling

Subject: GST and classification of food

Previously we gave you a private ruling about the Goods and Services Tax (GST) treatment of sales of (1) Dessert and (2) Dessert.

We have revised the above mentioned private ruling issued to you because an internal review of the private ruling revealed that it is incorrect in relation to the (2) Dessert product.

We confirm that our decision in relation to the (1) Dessert product remains. That is, sales of the (1) Dessert product remain taxable.

The following revised private ruling states that under section 38-2 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act) the relevant sale of (2) Dessert is GST-free.

This revised ruling, in relation to the (2) Dessert described above, takes effect from the date of this advice of revised ruling.

Question

Is the supply of the (2) Dessert a GST-free supply of food under section 38-2 of the GST Act?

Advice/Answers

Yes.

Relevant facts

• You are registered for GST and lodge Business Activity Statements (BAS) on a monthly basis.

• You will be selling the (2) Dessert through your stores.

• You have provided photos of the actual product, packaging and the ingredient list for the product which is the subject of your ruling request.

Dessert Tiramisu

• The (2) Dessert is a cold set ready to eat dessert that is primarily dairy based.

• The (2) Dessert is best described as a thin base of savoiardo biscuit soaked with the 'coffee soak', topped with a thick layer of mascarpone mousse and dusted with cocoa powder.

• The (2) Dessert is made principally of the following constituents:

• Mascarpone mousse

• Coffee soak

• Lady Fingers (Savoiardo)

• Cocoa preparation

• Ingredients include: glucose syrup, water, lady fingers (wheat flour, eggs, sugar, milk protein, raising agents: diphosphates, sodium bicarbonate), coconut oil, milk protein, alcohol, cocoa dusting (cocoa, dextrose, wheat starch, sugar, vegetable fat), stabiliser: sorbitol syrup; soluble coffee, thickeners: carrageenan, xanthan gum; tapioca starch, mascarpone cheese (cream, acidity regulator: lactic acid), egg yolk, emulsifier: mono and diglycerides of fatty acids; acidity regulator: citric acid; natural flavour, salt.

• The (2) Dessert will be merchandised through your stores dairy chillers. The product will sit alongside and will compete against other branded dairy desserts and yoghurt products. The product must be kept refrigerated at 4°C.

• The (2) Dessert is packaged in a sealed plastic tub. It is ready to eat and can be consumed directly from the plastic tub in which it is packed and sold.

Your contentions

• The dessert is not considered to be food of a kind specified in Schedule 1 of the GST Act.

• The dessert is also not a food product that combines a taxable food and a GST-free food as a distinct item.

• The supply of the dessert is not excluded from being GST-free by any provision contained in section 38- 3 of the GST Act.

• The dessert is akin to dairy desserts which are GST-free as listed in the Detailed Food list.

• Despite being described as a our product does not follow the traditional recipe for which involves savoiardi dipped in espresso being layered several times between whipped egg, mascarpone cheese and sugar and topped with cocoa.

Relevant legislative provisions

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

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

A New Tax System (Goods and Services Tax) Act 1999 paragraph 38-3(1)(c)

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

A New Tax System (Goods and Services Tax) Act 1999 paragraph 38-4(1)(a)

A New Tax System (Goods and Services Tax) Act 1999 Schedule 1 clause 1 item 20

Reasons for decision

A supply of food will be GST-free under section 38-2 if it satisfies the definition of food in section 38-4 and the supply is not excluded from being GST-free by section 38-3.

The meaning of food includes at paragraph 38-4(1)(a), food for human consumption. The (2) Dessert product satisfies the definition of food for the purposes of section 38-4 as it is food for human consumption.

However, under section 38-3 certain supplies of food are not GST-free. Paragraph 38-3(1)(c) is relevant to the (2) Dessert product and reads as follows:

38-3 Food that is not GST-free

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

(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;

In relation to the second limb of paragraph 38-3(1)(c), the tiramisu product is not considered to be a combination of foods in the context of this provision. An example of a product that would be a combination in this context is a snack pack containing cheese and biscuits.

For the purposes of paragraph 38-3(1)(c) the issue is whether the tiramisu product is food of a kind that is specified in the table in clause 1 of Schedule 1. The food product 'tiramisu' is not specifically listed, but item 20 of the table in clause 1 of Schedule 1 (Item 20) is considered the relevant item.

The third column of Item 20 lists 'cakes, slices, cheesecakes, pancakes, waffles, crepes, muffins and puddings' as food that is not GST-free. None of these food products are defined in the GST Act and as such take on their ordinary meaning.

The Australian Oxford Dictionary (online) defines 'tiramisu' as:

An Italian dessert consisting of layers of sponge cake soaked in coffee and brandy or liqueur with powdered chocolate and mascarpone cheese.

The research into tiramisu products shows that there is a significant variation in the type of products that are called tiramisu, including those that are called a tiramisu cake. The issue of what a product is called, or what is on the label, was considered in the Full Federal Court case Lansell House Pty Ltd and Perfek Pty Ltd v Commissioner of Taxation 2011 ATC 20-239 (Lansell House). The Court held a paragraph 29:

"that the supplier cannot, by a label, govern the classification of a product for the purposes of the GST Act."

Therefore, although a wide range of products are called tiramisu, it does not necessary follow that they will all have the same GST classification.

Further, in the Lansell House case at paragraph 23 the Commissioner submitted and it was accepted by the Court:

"that what is and what is not a cracker is not a 'bright line' defined by the percentage of its ingredients."

For the purposes of the GST classification of this (2) Dessert, the question is whether it is a kind of cake or cheesecake. These are the foods listed in Item 20 that are considered relevant.

The ordinary meaning of cake and cheesecake, as per the Australian Oxford Dictionary (online), is:

Cake: An item of soft sweet food made from a mixture of flour, fat, eggs, sugar, and other ingredients, baked and sometimes iced or decorated.

Cheesecake: A kind of rich sweet tart made with cream and soft cheese on a biscuit base.

As mentioned the research showed certain tiramisu products with multiple and distinctive layers of sponge or biscuit, these were typically sold in cafes' or restaurants as kinds of cakes. That kind of tiramisu, as currently listed in the Detailed Food List, would be classified as taxable for GST purposes under Item 20 as a 'cake'.

However, there is little comparison between the cream based and mousse type content, structure and appearance of the (2) Dessert product at issue to those kinds of tiramisu cakes.

The (2) Dessert has very small cheese content and is mainly a mascarpone mousse and coffee soak on a thin biscuit base. Generally a cheesecake would be expected to contain a greater cheese content which would give it a firmer structure enabling it to stand on a plate and be sliced. On balance the (2) Dessert does not fall within the genus, class or description of a 'cake' or 'cheesecake' in Item 20.

As such we consider that the (2) Dessert is not excluded from being GST-free under section 38-3, as it is not food of a kind specified in item 20.

Consequently, the supply of the (2) Dessert is GST-free.