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Edited version of your written advice
Authorisation Number: 1012855046145
Date of advice: 6 August 2015
Ruling
Subject: GST and buns
Question 1
Is the supply of buns containing confectionery with fruit centres (CFCs) a GST-free supply of food for the purposes of section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes.
Relevant facts and circumstances
You manufacture buns that contain CFCs. CFCs are mixed with other ingredients to create the final dough mixture. The CFCs form approximately X% of the final dough mixture. The CFCs are mixed with the dough before baking to produce the final 'CFCs Buns' product.
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 section 38-4
Reasons for decision
Summary
The supply of buns containing CFCs is a GST-free supply of food for the purposes of section 38-2 of the GST Act.
Detailed reasoning
A supply of food 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). Buns containing CFCs are food for human consumption and therefore satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act.
However, 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 food that is a combination of one or more foods at least one of which is food of such a kind.
Item 27 in Schedule 1 (Item 27) lists bread (including buns) with a sweet filling or coating. Buns are generally a fruit bun with a light glaze and a choux paste cross on top. Neither the glaze or choux paste are considered to be a sweet coating for the purposes of Item 27.
The buns in question contain CFCs a confectionery item. The CFCs are mixed with the dough ingredients before baking and are considered to be ingredients for the buns. At X% they are a significant, but not overwhelming component of the total and are not regarded as (sweet) fillings. Accordingly, as the buns containing CFCs do not have a sweet filling or coating, they are not food of a kind specified in Item 27, and are not specified in any of the other items in Schedule 1. Furthermore, they are not food that is a combination of one or more foods at least one of which is food of such a kind. Hence CFCs are not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.
Additionally, the buns containing CFCs are not excluded from being GST-free by virtue of any of the other paragraphs of subsection 38-3(1) of the GST Act. Therefore, they are GST-free under section 38-2 of the GST Act.