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Edited version of your written advice
Authorisation Number: 1012905949700
Date of advice: 2 November 2015
Ruling
Subject: GST Free Food 38-3
Question
Does Entity A make a GST -free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies 'Product A' and 'Product B'?
Answer
No, you do not make a GST-free supply under section 38-2 of the GST Act when you supply "Product A' and 'Product B'.
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 paragraph 38-4(1)(a) of the GST Act to include food for human consumption (whether or not requiring processing or treatment). You produce a product for human consumption and therefore, satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act.
However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is a food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1).
Therefore, the issue is whether or not the sausage roll is a 'food of a kind' specified in Schedule 1.
The term 'of a kind' is not defined in the GST Act. The phrase was considered in Lansell House Pty Ltd & Anor v. FCT 2011 ATC 20-239 (Lansell House) where the court confirmed that there was no 'bright line' test for what is or is not a food in Schedule 1.
When classifying a food for the purposes of paragraph 38-3(1)(c), the term 'food of a kind specified' is a question of whether the resulting product comes within the genus, class or description of the item listed.1 The item from Schedule 1 that is of most relevance to this case is item 22 of Schedule 1.
The category of bakery products extracted from Clause 1 of Schedule 1 is reproduced below:
Food that is not GST-free | ||
Item |
Category |
Food |
|
|
|
20 |
Bakery products |
cakes, slices, cheesecakes, pancakes, waffles, crepes, muffins and puddings |
21 |
|
pavlova and meringues |
22 |
|
pies (meat, vegetable or fruit), pasties and sausage rolls |
23 |
|
tarts and pastries |
24 |
|
doughnuts and croissants |
25 |
|
pastizzi, calzoni and brioche |
26 |
|
scones and scrolls |
27 |
|
bread (including buns) with a sweet filling or coating |
Item 22 of Schedule 1 lists 'pies (meat, vegetable or fruit), pasties and sausage rolls'.
The Macquarie Dictionary (2013) defines a 'sausage roll' as a roll of baked pastry filled with sausage meat.
The product you supply consists of raw coarsely ground meat (plus salt, herbs, and spices) that has been minced and rolled up in a sheet of puff pastry.
As such, the product you supply is a kind of sausage roll.
Clause 2 of the Schedule 1 of the GST Act operates to ensure that food listed at item 22 is not GST free regardless of whether it is supplied hot or cold, require cooking, heating thawing or chilling prior to consumption.
The Further Supplementary Explanatory Memorandum2 (EM) comments on Bakery products at paragraph 1.38 stating:
Bakery products
Bakery products that are listed in new Schedule 1A will be taxable. The goods included in the list of bakery products will be taxable when sold by bakeries as well as by other businesses. It will not matter whether a bakery product is sold fresh or frozen.
The EM first suggests that bakery products relate to items sold by bakeries, but this is immediately clarified with the inclusion of 'other businesses'. The EM explains that it does matter from what type of retail outlet a food item is sold from, nor whether it is sold fresh or frozen. What is determinative is whether the food item is listed in Schedule 1 or not.
You are registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. The supply is neither GST-free under any other provision of Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, you are making a taxable supply under section 9-5 of the GST Act when you supply 'Product A' and 'Product B'.
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You applied for a Private Binding Ruling in September 20XX.
Your entity name is Entity A
Your Australian Business Number is XXXX
You are registered for GST.
1 Lansell House at paragraph 30.
2 To A New Tax System (Goods and Services Tax) Bill 1998 at Chapter 1 - Food Subdivision 38-AA.