Edited version of your written advice

Authorisation Number: 1012887938445

Date of advice: 1 October 2015

Ruling

Subject: GST and gluten free children's meals

Question 1

Is the supply of gluten free children's meals GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No, except for one product

This ruling applies for the following periods:

01/07/2015 - 30/06/2018

The scheme commences on:

01/07/2015

Relevant facts and circumstances

You produce baby food and gluten free children's meals which are available for order through your website.

Your website provides that your products are now stocked in a supermarket.

You are registered for goods and service tax (GST).

You currently have a private binding ruling that exempts baby food from GST.

You would like to know if your gluten free children's meals are subject to GST.

Your gluten free children's meals are suitable for anyone over the age of 12 months. The meals come in single serving size of X grams and are snap frozen.

Customers can pick up their orders from your wholesale premises or pay extra for delivery via courier services Australia wide.

The meals are sold to a company who distributes to childcare centres.

All orders are packed in ice to ensure that the products remain frozen throughout the journey and should be placed in the freezer immediately upon arrival.

Your gluten free children's meals comprise X products.

The meals are packaged into containers with labels outlining the weight, nutrition information, recommendation to keep frozen at or below Y°C, ingredients, heating instructions, date of package, best before date and batch number.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

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

A New Tax System (Goods and Services Tax) Act 1999 Schedule 1 table item 4

A New Tax System (Goods and Services Tax) Act 1999 Schedule 1 clause 3

Reasons for decision

Summary

The supply of gluten free children's meals is a taxable supply under section 9-5 the GST Act. The supply of one product is GST-free.

Detailed reasoning

Section 9-40 of the GST Act provides that you must pay the GST payable on any taxable supply that you make.

A supply is a taxable supply if all the requirements of section 9-5 of the GST Act are met. The requirements under section 9-5 of the GST Act are:

(a) you make the supply for consideration; and

(b) the supply is made in the course or furtherance of an enterprise that you carry on; and

(c) the supply is connected with Australia; and

(d) you are registered, or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

In your situation, you will be providing gluten free children's meals for consideration and in the course of your enterprise. The children's meals are supplied in Australia and you are registered for GST. Therefore, the supply of children's meals satisfy paragraphs 9-5(a) to 9-5(d) of the GST Act.

There is nothing in the GST Act which would make your supply of gluten free children's meals input taxed. Thus, we need to consider if the supply is GST-free.

Division 38 of the GST Act specifies the types of supplies that are GST-free. 

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). Your gluten free children's meals are food for human consumption and satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act.

Under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind that is specified in the table in clause 1 of Schedule 1 to the GST Act. Of specific relevance is Item 4 of Schedule 1 to the GST Act (Item 4), which provides that food marketed as a prepared meal (but not including soup) is not GST-free. Clause 3 to Schedule 1 provides that Item 4 only applies to food that requires refrigeration or freezing for its storage.

The GST Food Guide published on the Tax Office website (the food guide) lists baby food as GST-free but only to the extent that it is in tins or jars and does not require refrigeration or freezing. If baby food is correctly classified as a prepared meal that requires refrigeration or freezing for its storage, it will not be GST-free due to Item 4 of Schedule 1.

The food guide notes that a prepared meal is food that meets the following three conditions:

• directly compete against takeaways and restaurants,

• require refrigeration or freezing for its storage, and

• are marketed as a 'prepared meal'.

Require refrigeration or freezing for its storage

You have advised that your gluten free children's meals are snap frozen, are delivered with ice to ensure the products are kept frozen throughout the journey and should be placed in the freezer immediately upon arrival. Furthermore, the packaging labels on these products require the products to be kept frozen at or below Y°C. Hence, these children's meals require freezing for their storage.

Marketed as a 'prepared meal'

The term 'prepared meal' is not defined in the GST Act and thus takes the ordinary English meaning. A relevant definition of 'meal' in The Australian Oxford Dictionary 1999, Oxford University Press, Melbourne (dictionary) is 'the food eaten on one occasion'. The dictionary also defines 'prepare' as 'make ready or assemble (food, a meal etc.) for eating'.

The food guide then provides that a prepared meal is food marketed as a prepared meal but not including soup.

In determining whether food is marketed as a 'prepared meal', the food guide provides that consideration should be given to how the goods are promoted or advertised, and the name, price, labelling, instructions, packaging and placement of the goods in the store.

However, these factors do not conclusively indicate that the product is marketed as a prepared meal. The food guide gives further assistance by providing examples of prepared meals including:

• curry and rice dishes, mornays and similar dishes sold cold 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 examples, single serves of a roast dinner including vegetable and low fat dietary meals).

All of the above meals, except for the sushi, are of a kind that are duly assembled, cooked or partly cooked and require heating and completion of the cooking process for them to be ready for consumption. Sushi is by its nature ready for consumption when it is duly assembled even though part of it is raw.

Your gluten free children's meals comprise X products and are packaged into containers. They come in single serving size of Xgrams and are frozen and just need reheating according to the instructions on the packages.

As your gluten free children's meals are fully assembled, that is, no further activity apart from heating is required they are considered prepared in accordance with the ordinary meaning. Furthermore, as the meals come in single serving size and are designed as complete meals for children over certain age they meet the ordinary meaning of a meal.

Thus, taking into account the above factors we consider that your gluten free children's meals are 'prepared meals' and are marketed as 'prepared meal'.

Directly compete against takeaways and restaurants

The sample for product 1 that you provided shows that the meal is in a puree form with chunky vegetables cooked really soft.

In the private ruling that we gave you for your baby food products we consider that your baby food products are GST free as they are completely puree food for babies which do not compete directly against restaurants and takeaways and thus do not belong to the class of prepared meal.

Therefore, the same principles that apply to your baby food products would apply to product 1, making this product GST free.

Samples you provided for the other products show that these meals do not come in puree forms.

The ingredients used in these products are of similar ingredients used for these dishes cooked by restaurants. In addition, the form and texture of these products are of similar form and texture to the same dishes cooked by restaurants.

In weighing up all the factors, we consider that these meals could conceivably compete directly against meals from restaurants and takeaways. As such these products are prepared meals and are excluded from GST-free status by Item 4 of Schedule 1.