Edited version of your written advice

Authorisation Number: 1012699357403

Ruling

Subject: Food classification

Question

Is the supply of the foods GST-free?

Advice

Yes

Relevant facts and circumstances

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

• You sell a mix of takeaway foods from your store.

• The foods are displayed at your food display cabinets.

• The foods require refrigeration for storage.

• The foods are marketed as a side dish to the other foods.

• The foods are packed in takeaway containers and not intended for consumption on your premises.

• There are no hot foods in the foods.

Reasons for decision

A supply of food is GST-free under section 38-2 of the GST Act, if it satisfies the definition of food in section 38-4 of the GST Act and it does not come within any of the exclusions in section 38-3 of the GST Act.

The meaning of food in section 38-4 of the GST Act includes food for human consumption (whether or not requiring processing or treatment). The food products are a supply of food for human consumption and therefore fall within the meaning of food in section 38-4 of the GST Act.

Subsection 38-3(1) of the GST Act specifies some foods are excluded from being GST-free. These includes food consumed on the supplier's premises (paragraph 38-3(1)(a)), hot takeaway food (paragraph 38-3(1)(b)) and foods that are listed in Schedule 1 (paragraph 38-3(1)(c)).

Hot takeaway food and food for consumption on supplier's premises

Paragraph 38-3(1)(a) and (b) of the GST Ac t ensures that takeaway foods and foods that are to be consumed on the suppliers premises will be subject to GST. This is the case irrespective of whether the item of food sold would otherwise be GST-free.

You have confirmed that there are no hot foods included in your foods. The foods are packed in takeaway containers and are intended for consumption away from your premises. Therefore paragraphs 38-3(1)(a) and (b) of the GST Act do not apply to the foods.

Paragraph 38-3(1)(c) of the GST Act

Under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free under section 38-2 of the GST Act if it is a supply of food of a kind specified in Schedule 1.

The Australian Taxation Office (ATO) view on foods is listed in the Detailed Food List (DFL) ruling.

The food that is not marketed as a prepared meal is relevant to your supplies of foods. For the foods to be GST free, we need to apply the marketing test for the food. Where a food is not marketed as a prepared meal, the food will be GST-free.

Prepared meal

Item 4 of Schedule 1 (item 4) of the GST Act states:

*food marketed as a prepared meal, but not including soup

The Food Industry Partnership Issue Register No. 5 (Food Register) in relation to the issue of 'What is a prepared meal?" stated as follows:

…Item 4 of Schedule 1 of the GST Act operates to subject the following to GST:

"food marketed as a prepared meal, but not including soup". The Further Supplementary Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998 (the EM) provides that the term 'prepared meal' is intended to cover a range of food products that:

• directly compete against take-away and restaurants;

• require refrigeration or freezing for storage (clause 3 of Schedule 1); and

• are marketed as a 'prepared meal'.

The term 'prepared meal' is not a defined term in the GST Act and will therefore bear its ordinary meaning. The Macquarie Dictionary (Dictionary) stated that the term 'meal' means 'the food eaten or served for a repast'. This definition of 'meal' could be applied to a single food item or to a meal consisting of several food items.

Further, the Dictionary defines 'prepare' in relation to food as 'to get ready for eating, as a meal, by due assembling, dressing or cooking'.

The EM at paragraph 1.33 provides examples of prepared meals:

• prepared meals, such as 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).

A food item is regarded as a 'prepared meal' in accordance with Item 4, if the food is assembled and dressed when supplied. In addition 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.

It is considered that the food satisfies both clauses 2 and 3 of Schedule 1 as the food is ready for consumption when supplied and the food requires refrigeration for storage. The food is already assembled, dressed and placed in a takeaway container.

Whether the food is marketed as a prepared meal?

According to the EM, a prepared meal listed in item 4 will satisfy the following:

1. directly compete against take-away and restaurants;

2. require refrigeration or freezing for storage (clause 3 of Schedule 1); and

3. are marketed as a 'prepared meal'.

In this case, based on the facts provided, the food meets the requirements under (1) and (2) above. Therefore, we need to consider whether the food is marketed as a 'prepared meal'.

The ATO view on "Prepared Meal" is outlined in Goods and Service Tax Industry Issue - Food partnership Prepared Food (Prepared Food) ruling. Paragraph 12 of the Prepared Food 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

Consideration should be given to the actual food product specifications, labelling, pricing, labelling and marketing as well as any cooking instructions. This could be summarised in the marketing test

The Marketing test

The issue to consider for the marketing test is whether the food is marketed as a 'prepared meal'.

The food contains a mix of vegetables, meat and pasta. The food is packed in takeaway containers and not intended for consumption on the premises.

The food is marketed as a side dish to the other foods indicating the salads foods are not marketed as prepared meals. The food is supplied as part of a product mix of foods sold at your stores.

The food is not marketed as a prepared meal and is therefore not food listed in item 4. The food is not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

The supply of salad foods is a GST-free under section 38-2 of the GST Act.