Edited version of your written advice

Authorisation Number: 1012909691563

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Date of advice: 14 April 2016

Ruling

Subject: GST and supply of salads

Question 1

Are you making a GST-free supply when you supply the following products in supermarkets and convenience stores?

Answer

No, the three products sold both in the supermarkets and convenience stores are subject to GST.

Relevant facts and circumstances

You are a company registered for GST.

There are two formats supermarkets this ruling refers to:

• Supermarkets - medium and large format supermarkets. These stores make up X% of your supermarket network. There are currently X supermarkets in these formats.

• Convenience stores - small format versions of the medium and large supermarkets. No chairs or tables are provided in the store.

Depending on the store, the products are positioned in different areas:

• X Fridges:

• Located in convenience stores and medium to large format supermarkets.

• In some instances, the fridges are branded with a sign; X'.

• Items that are displayed in these fridges include salads, sandwiches, sushi, drinks and yoghurts.

• Fresh Produce Fridges:

• Located in the fresh fruit and vegetable area next to the leafy green salads in supermarkets.

• Items that are displayed in these fridges are fresh cut vegetables and leafy green salads in sealed plastic bags. Other products in this fridge also include coleslaw, tabouleh and potato salad in a X gram container.

• Delicatessen:

• Located in supermarkets.

• Items are displayed in a glass refrigerated cabinet.

• Customers are served by staff behind the counter.

• The customers are able to choose products behind the glass to be scooped into plastic tubs which come in three sizes: small, medium and large.

• The sign at the deli counter says 'X' before listing the three sizes and their prices 'SMALL $X each, MEDIUM $X each, LARGE $X each'.

• Other products in this display also include cold pies, quiches, olives, antipasto and assortment of meats.

• Chilled Fridges:

• Located in chilled section of supermarkets next to the dairy area. The Chilled Section holds items to be kept at a certain temperature below ambient but not frozen.

• Items that are displayed in the dairy area include yoghurts, butter and cheese.

• Cutlery:

• Cutlery is also available for purchase and is displayed in the fresh produce fridges and chilled fridges in a supermarket but not the X fridges. The cutlery is in a sealed package and contains a plastic knife and a fork. The cutlery is sold for $X. Customers pick up the cutlery which has a barcode. At the checkout, it is scanned along with the product and any other items purchased.

• In the delicatessen, the cutlery is also available for purchase and is sold from a cardboard box on the counter of the deli. A price sign is placed next to the box which describes the product and states the price of the cutlery.

You market these products on your website, catalogues and targeted emails to specific customers that appear normally as part promotions to sell the final product. Your typical marketing activities include significant displays and signage such as stands, handouts in store, samplings (however the salad products are seldom promoted in stores by stands, handouts or sampling), and promotion of products through print catalogues, the website, and various advertising and social media, as well as by direct email to all members of the X program.

The salads are marketed by the attributes of the products, as in the labelling, prices etc. and the manner in which they are displayed in the particular part of the store, i.e. X fridges, chilled fridges or fresh produce fridges. X fridges are not included in marketing campaigns.

Salad Products

All 3 products require refrigeration for storage.

1. Salad A

The product is sold from both the X fridges and the Fresh Produce fridges and is labelled 'A'. The label also contains the supplier 'Xs' logo: 'X'.

The ingredients as listed on the label are: X.

The front of the packaging describes 'A' as 'X Salads' and states to store at or below 5 C.

The A is packed in a container. There is no resealable lid. A light plastic sheet with adhesive seals the container. The product's net weight is Xg. The shelf price is $X.

There are no serving or preparation suggestions on the label.

The same product is supplied by X.

The product is also sold in the delicatessen section of the supermarket where customers are able to choose the product behind the glass to be scooped into plastic tubs by staff.

2. Salad B

The product is sold from both the X Fridges and in the chilled fridges section of the supermarket next to the dairy area. In the convenience stores the product sits in the X fridges. In the medium and large format supermarkets, X Salad and X complete salad are found in the Fresh Produce fridges of the store and sit next to the fresh cuts and leafy salads, including lettuces.

Other products are found in the fridges next to pre-cut vegetables ready for steaming.

The product is labelled as 'B Salad'. The label also contains the name of the supplier and the X logo.

The product's net weight is X. Its shelf price is $X.

The label provides the serving suggestion for one person. The ingredients as listed on the label are X.

B is packed in a clear plastic container with a resealable plastic lid. A small fork is included in the container.

The plastic container is in an X shape. The whole egg mayonnaise is in a separate plastic pot with a removable lid and placed inside the clear plastic container. The other ingredients are loose in the container and are not separately packaged.

3. Salad C

The product is sold in from the X fridges at the front of the store of the medium to large format supermarkets.

The product is labelled as 'C'. The label also contains the supplier X's logo. The product's net weight is Xg. The shelf price is $X.

The ingredients in the salad as listed on the label are X.

C is packed in a container with a resealable plastic lid.

The dressing for the C comes in separate plastic pot with a resealable lid. The pot is contained inside the plastic packaging.

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 section 195

Reasons for decision

A New Tax System (Goods and Services Tax) Act 1999 (GST Act) imposes GST on taxable supplies. A supply is not a taxable supply to the extent it is GST-free or input taxed (sections 7-1 and 9-5). Section 195-1 of the GST Act defines food by reference to section 38-4. The products at issue fall within the definition of food.

Food is GST-free (section 38-2) unless section 38-3 applies. Under this section, food is not GST-free where:

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

(a) *food for consumption on the *premises from which it is supplied; or

(b) hot food for consumption away from those premises; or

(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; or

(d) a *beverage (or an ingredient for a beverage), other than a beverage (or ingredient) of a kind specified in the third column of the table in clause 1 of Schedule 2; or

(e) food of a kind specified in regulations made for the purposes of this subsection.

(2) However, this section does not apply to a supply of *food of a kind specified in regulations made for the purposes of this subsection.

(3) The items in the table in clause 1 of Schedule 1 or 2 are to be interpreted subject to the other clauses of Schedule 1 or 2, as the case requires.

Paragraph (a) food for consumption on the premises from which it is supplied, does not apply as there are no facilities such as chairs and tables for consumption on the premises.

For the products at issue it is accepted that:

• the products are not food for consumption on the premises from which they are supplied,

• the products are not hot food for consumption away from the premises,

• the products require refrigeration

• the products are not a soup, and

• there are no relevant regulations and that beverages are not an issue.

Paragraph (c) provides that a food of a kind specified in the third column of the table in clause 1 of Schedule 1 will be taxable. Relevant to paragraph (c) and the food products at issue is the category of 'Prepared food' in Schedule 1 and more specifically, item 4 in the third column which states:

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

Regarding 'prepared' food and meals, clauses 2 and 3 of Schedule 1 state:

2 Prepared food, bakery products and biscuit goods

For the purpose of determining whether particular *food is covered by any of the items in the table relating to the category of prepared food, bakery products or biscuit goods, it does not matter whether it is supplied hot or cold, or requires cooking, heating, thawing or chilling prior to consumption.

3 Prepared meals

Item 4 in the table only applies to *food that requires refrigeration or freezing for its storage.

It follows that the supplies of the products will be GST-free unless the food is a kind of food marketed as a prepared meal or is a combination of one or more foods which are a kind of a food marketed as prepared meal (paragraph 38-3(1)(c) of the GST Act).

The use of the words 'of a kind' in paragraph 38-3(1)(c) adds further generality to the description 'food marketed as a prepared meal' in item 4 of Schedule 1 therefore this description should not be construed narrowly.

The term 'prepared meal' is not a defined term in the GST Act and will therefore bear its ordinary meaning. In the context of food, The Macquarie Dictionary (Dictionary) defines 'prepare' as 'to get ready for eating, as a meal, by due assembling, dressing, or cooking'.

'Meal' is defined as 'the food eaten or served for a repast' and 'one of the regular repasts of the day, as breakfast, lunch, or dinner.'

The ATO view on "prepared meal" is further outlined in Goods and Service Tax Industry Issue - Detailed Food List (Detailed Food List) ruling as follows

Food items	GST	Reasons
prepared meal that: directly competes with takeaways and restaurants, needs refrigeration or freezing for its storage and is marketed as a prepared meal	taxable	Schedule 1, item 4 of the GST Act applies. Examples include: curry and rice, mornays, seafood in sauce with pasta and/or vegetables, fresh or frozen prepared lasagne, sushi, cooked pasta dishes complete with sauce, frozen TV dinners, fresh or frozen complete meals that include meat and vegetables and low fat dietary meals. These types of meals are usually packaged in a container from which they can be eaten.
prepared product that requires assembling before consumption	GST-free	Exclusion at Item 4, Schedule 1 does not apply. Examples include: a curry or casserole with rice in individual packages that are heated separately and combined before consumption, meat or seafood in sauce with a serving suggestion to add rice/pasta and/or vegetables before consumption, products that require the consumer to cook and add meat to complete them. These types of meals are not packaged in a container from which they can be eaten and components need to be assembled on a plate prior to consumption or the product needs to be combined with other ingredients prepared by the consumer prior to consumption.

You submit the following arguments for GST-free status of the products at issue:

• Each salad could not be eaten by itself as it probably would not be substantial enough without an additional component to make it a complete meal.

A small or light salad isn't precluded from being a meal. Salads can be consumed as meals and are known to be promoted as a healthy alternative to other foods. The ordinary meaning of meal does not distinguish between sizes of meals.

Further if the products at issue weren't marketed as prepared meals on some strict view of item 4, for example serving size alone, then they may still be marketed as prepared meals 'of a kind' given the greater generality afforded by the operation of paragraph 38-3(1)(c) of the GST Act.

To argue that salads do not meet the criteria in the Explanatory Memorandum as they are distinctively different from the examples of prepared meals listed in paragraph 1.33 such as curry and rice and cooked pasta dishes which only need reheating is not accepted as although extrinsic materials may be relevant, they 'cannot displace the meaning of the statutory text'. See SZOXP v Minister [2015] FCAFC 69. It is the application of the law to the facts and circumstances of each product that will determine its classification for tax purposes.

Note 2 to the Schedule also provides that for the purpose of determining whether a particular food is covered by the items in the table relating to the category of prepared food, it does not matter whether it is supplied hot or cold, or requires cooking, heating, thawing or chilling prior to consumption. Therefore there is no requirement pursuant to the law for a meal to only require reheating to be classified as a food marketed as a prepared meal.

Further, the similar classification argument was unsuccessfully raised by the applicants in the first instance before the Federal Court in Lansell House Pty Ltd & Anor v FCT 2010 ATC 20-173 (Lansell House). This case considered whether a product known as 'mini ciabatte' was taxable. The product was imported and described on its packaging as 'Italian flat bread'. Specifically at issue, was whether the product fell within Item 32 of Schedule 1 of the GST Act being:

*food that is, or consists principally of, biscuits, cookies, crackers, pretzels, cones or wafers.

Sunberg J states at paragraphs 108 to 109:

Classification decisions for sales tax, GST and VAT purposes are often described as questions of fact and degree (Ferrero at 884), value judgments (Procter & Gamble at [13]), a matter of impression (Procter & Gamble at [19]) and a combination of fact finding and evaluative judgment (Procter & Gamble at [47]). In Procter & Gamble the VAT and Duties Tribunal did not "grade" the relevant factors in coming to its decision. It stood back and took all the factors of appearance, taste, ingredients, process of manufacture, marketing and packaging together in deciding the proper classification of "Regular Pringles". The Court of Appeal approved that approach. Lord Justice Jacob said at [19]:

"It was not incumbent on the Tribunal in making its multifactorial assessment not only to identify each and every aspect of similarity and dissimilarity (as this Tribunal so meticulously did) but to go on and spell out item by item how each was weighed as if it were using a real scientist's balance. In the end it was a matter of overall impression."

Adopting that approach, I am not persuaded that the Commissioner's classification of Mini Ciabatte as an item 32 product was wrong.

As this case illustrates, it is the facts and circumstances in respect of the products that will decide the issue.

We do not accept there has to be consistency applied to all the supermarkets for these salads as to the placement of products in the store alone. We take the view that the consistency must be not just where the product is situated in the store but in the application of the law to each product and in this case, it is in the circumstances in which the product is marketed, taking into account the total process whereby goods are put onto the market, not just where the product is situated in the store.

Discussion of the salads

Salad A

Prepared meal

A when served already prepared or prepared on site is ready to eat and does not require any further preparation by the consumer. Therefore, as explained above, it is considered that A is a prepared meal. The issue becomes therefore whether the product is marketed as a prepared meal or a kind of a prepared meal.

Marketed as a prepared meal

The Federal Court decision of Cascade Brewery Company Pty Ltd & Anor v FCT 2006 ATC 4339 (Cascade) considered the term 'marketed principally', in the context of whether the product at issue (Ultra-C) was 'marketed principally as food for infants or invalids' so that it would fall within Item 13 of Schedule 2 and be classified as a beverage that is GST-free.

In respect of 'marketing' Sunberg J provided at paragraphs 11, and 23 to 24:

The words "marketed principally as food for infants" in item 13 require an examination of the content of the advertising and other marketing in fact carried out either by the taxpayer or by competitors in the market. The witnesses to whom I have referred spoke somewhat generally about their aims and hopes in respect of the marketing. The relevant findings at [9] are based on the content of the marketing, that is to say, on what a reader of the labels, the Bounty bag brochure and the print advertisements or a viewer of the television advertisements would derive from them. The findings do not entirely accord with the witnesses' evidence about Cascade's aims. That evidence seems to me to have been subconsciously influenced by the existence of item 13 and the purpose of the litigation.

…..I have referred at [11] to one aspect of the word "marketed", about which the parties did not make submissions. Otherwise there does not appear to be any significant difference between their positions on the meaning of the expression "marketed principally". Cascade adopted the approach published by the Commissioner in SST11 - Sales tax: a guide to the classification of goods under the sales tax law (SST11):

"Marketing principally means the most important or the most significant of all the ways in which the product is marketed. Marketing involves an examination of the activities of the sellers of the relevant goods."

The document goes on to say that consideration may be given to the name of the goods, their price, the labelling on any containers, literature or instructions accompanying the goods, how they are packaged, how they are promoted or advertised, and how they are distributed.

This approach is consistent with the dictionary meanings of "marketing". Thus The Macquarie Dictionary refers to "the total process whereby goods are put onto the market". The Australian Oxford Dictionary refers to "the action or business of promoting and selling products, including market research and advertising".

The use of 'principally' in Schedules 1 and 2 creates a higher test as it is included as an additional qualifier. Item 4 of Schedule 1 is not qualified by the use of 'principally' therefore a lesser standard in terms of the level marketing activity is required.

The ATO view in Issue 12 of Goods and Service Tax Industry Issue - Food partnership Prepared Food (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

This approach is consistent with the dictionary meanings of "marketing" according to the Federal Court in Cascade Brewery Company Pty Limited v Commissioner of Taxation [2006] FCA 821 (Cascade Brewery).

(a) the name of the goods;

The name: 'A', although not necessarily determinative of whether the product is marketed as a prepared meal, conveys to the consumer that it contains multiple food groups together with flavouring to make it more tasty and is obviously prepared (in terms of being pre-cooked) because the customer would know from the label that it is not a container of raw X and uncooked X. These factors would indicate to the consumer that it is a 'meal' and is prepared for consumption.

(b) the price of the goods;

The $X price of A having regard to its size is generally in the same range as the competing food options available in other takeaways and restaurants.

You submit that the significant pricing differential between this salad ($X) and similar takeaway salads sold at a premium in food courts should be taken into account in deciding whether the products are in competition with each other. For example, a food court retailer's medium size X retails at $X. Its serving size is also larger at Xg compared to "A" which is Xg.

Competition with takeaways and restaurants is only a factor in determining if a product is marketed as prepared meal. It is not accepted that this precludes the product from being marketed as prepared meal as a consumer may prefer to obtain a serving at your supermarkets especially if it is cheaper than similar products in takeaways or restaurants.

Your contention that the salads do not meet the criteria in the EM as they are distinctively different from the examples of prepared meals listed in paragraph 1.33 such as curry and rice and cooked pasta dishes which only need reheating is not accepted. The Explanatory Memorandum was drafted over 15 years ago and food technology and consumer preference has since changed. Given the context, scope and purpose of the section, the statutory construction should be one that enables the provision to be "always speaking". That is the test pursuant to the third column of item 4 is if the product is 'marketed as a prepared meal', rather than if the product can be compared to a list of products contained within the explanatory memorandum.

(c) the labelling on any containers for the goods;

The front of the packaging describes A as 'X'.

(d) literature or instructions packed with the goods;

The instructions on the label provide the product needs to be stored at or below 5 degrees Celsius. This is not enough to suggest the product is marketed as a prepared meal or a kind of prepared meal, however does confirm that the product requires refrigeration for its storage.

(e) how the goods are packaged;

A is packed in a container. There is no resealable lid and there is a light plastic sheet with adhesive to seal the container. The non-resealable lid is consistent with the product being marketed for immediate consumption.

The package does not include any cutlery but it can be purchased separately for $X. The cutlery is available for purchase in the fresh produce fridges from where A is displayed. The placement of the cutlery next to the products promotes and facilitates the immediate consumption of A as a take away meal.

These factors would indicate the product is marketed as prepared meal.

(f) how the goods are promoted or advertised;

You market these products on your website, catalogues and targeted emails to loyalty card customers.

In medium and large format supermarkets, the product is sold in the Fresh Produce fridges of the store and sits next to the fresh cuts and leafy salads. In the convenience stores it is positioned in the X fridges at the front of the store. Therefore, the marketing and promotion in these fridges of the product is specifically one of prepared meals.

In some stores, X fridges are specifically signed 'X'. The fridges are also placed at the front of the store within sight of the customer when entering the store therefore the products displayed in these fridges are marketed as quick and easy for immediate consumption away from the premises.

Sunberg J in Cascade at paragraph 23 states that marketing involves an examination of the activities of the sellers of the relevant goods. The fact that the 'X' fridges are also referred to internally as 'X' points to your marketing strategy, to market such products in the fridges as products that consumers can purchase for a meal, being lunch and for immediate consumption.

Other items that are displayed in these fridges include salads, sandwiches, sushi, drink and yoghurts. These are all items which are typically consumed for lunch.

All these factors are consistent with the product being marketed as a prepared meal.

You maintain that when placed next to the fresh cuts and leafy salads in the supermarkets, you are marketing A as a side to the leafy salads similar to the other kinds of leafy salads which are viewed as a side dish. Therefore, this should apply to the salad in the X fridges. Marketing involves an examination of all the activities of the seller. The marketing of a product needs to be examined as a whole. Therefore if this product is marketed as a prepared meal, its position in the supermarket alone will not change its GST status. In this case, A is being marketed as a product that can be eaten as a meal and therefore this classification equally applies to the product in general including when it is situated in the "salad aisle".

Cutlery is also available for purchase from the Fresh Produce fridge where the A is displayed further providing that the product is marketed as a prepared meal for immediate consumption.

(g) how the goods are distributed

This depends on the format of the supermarket. The product can be in the convenience stores in the X fridges at the front of the store or in the medium and large format supermarkets in the X fridges and the Fresh Produce fridges next to the fresh cuts and leafy salads.

The product served from the deli counter is also marketed as a prepared meal. It is essentially the same product which is labelled and sold from the Fresh Produce Fridge and X fridges.

The product is placed into a clear plastic container, this container itself does not change the product or how it is marketed throughout the store.

In the delicatessen the cutlery is also available for purchase and is sold from a cardboard box on the counter of the deli. A price sign is placed next to the box which describes the product and states the price of the cutlery. The provision of cutlery at the deli counter continues to promote the products as being for immediate consumption as a meal.

All these factors are consistent with the product being marketed as a prepared meal.

directly compete against takeaways and restaurants

You submit that the salads do not directly compete with takeaways and restaurants when retailed by you, as the stores are not providing a food court or restaurant experience because the salads are not intended to be consumed on the premises. Also the small serving size can help decide whether a salad is a side or a prepared meal when comparing the salads sold at your stores to those sold in takeaways and restaurants.'

Direct competition is not limited by comparable conditions or close proximity of takeaways and restaurants and can apply to the purchaser taking the salad away for consumption at another location. A small serve of a food product may still be a meal for the purposes of determining whether it is a prepared meal. The fact that a product may be a smaller serving than another product sold elsewhere does not preclude them from being comparable and in competition.

You also submit that the significant pricing differential between this salad ($X) and similar takeaway salads sold at a premium in food courts should be taken into account in deciding whether the products are in competition with each other. For example, a food court retailer's medium size X Salad retails at $X. Its serving size is also larger at Xg compared to "A" which is Xg. This is not accepted as a consumer may prefer to obtain a serving at your supermarkets especially if it is cheaper than similar products in takeaways or restaurants.

We submit that there are sufficient similarities between the products you mentioned for there to be an element of competition. A consumer would have a choice between your product considering its size, price, ingredients, taste, kilojoule content, amount of protein and fat etc. to that of similar products in takeaways and restaurants. The consumer may choose your product because of its value, size, ingredients etc. so it is competing with those supplied by takeaways and restaurants.

Responses to arguments:

• The placement of a food in an area expressly calling it X will only be one, factor when determining if a food is 'marketed as a prepared meal'. All of the factors listed above have to be considered in total. There is no criterion involving flavour to determine whether a food is a meal or side dish. Whether the food is bland is up to the consumer.

• There is no legislative test that a salad is GST-free. The legislative test (after excluding paragraphs 38-3(a) and (b) of the GST Act) is that a food of a kind specified in the third column of the table is not GST-free. Therefore the test is not if the product is a salad, but if it is a food of a kind, in this case, food marketed as a prepared meal (see Lansell House).

• Marketing involves an examination of all the activities of the seller (Cascade). The marketing of a product needs to be examined as a whole. Therefore if this product is marketed as a prepared meal, its position in the supermarket alone will not change its GST status. Where a product is being marketed as a prepared meal this classification equally applies to the product in general.

Placing a product which is in a 'X' Fridge forms part of the marketing that this product is being marketed as a prepared meal. That is a product that can be eaten at lunch (as a meal) and is intended to be taken away from the premises. Given the product is marketed as "X" this may also be used as a factor that the product does compete with takeaways.

• The argument that it is impractical to have two GST treatments for the same product sold in two different areas within the same store is not relevant as the product is marketed as a prepared meal both in the X fridges and away from those fridges.

• Reference in the Explanatory Memorandum to prepared meals listed in paragraph 1.33 such as curry and rice and cooked pasta dishes which only need reheating are different to salads cannot restrict the interpretation of legislation if it can reasonably be applied to specific circumstances not envisaged in the EM.

• Salads placed in a location without express mention as a meal/prepared meal does not of itself determine marketing alone as all aspects of the marketing have to be considered.

• To argue that there is a commercial difference between a Deli and a Food Court salad provider and that basic difference is what the customer is expecting when purchasing the salad offering (ie in the Deli space the customer is not being sold a salad to be marketed as a ready to go meal, if they want this offering they would go to the X Fridge space. The Food Court provider of a salad provides a salad on the expectation it is to be consumed in that Food Court not to be taken away as a side to future meal) is not accepted. The A's ingredients make it a meal and it is prepared whether already prepacked or prepared for the customer. While the salad may not be expressly represented as a lunch by signs on or next to the fridges, the other aspects of its marketing point to it being marketed as a prepared meal. The customer is able to consume the salad outside the store whether it's taken from the X fridges or from the Deli counter.

Summary

Taking into consideration the individual elements of marketing, viewed collectively and on balance, salad A is marketed as prepared meal. As the product is food of a kind listed under item 4, it is excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act and is taxable.

Salad B

Prepared meal

You submit that B requires the contents to be tossed and mixed with utensils and the dressing needs to be mixed through the salad and "…..for the salad to be a prepared meal, it must be ready for consumption when supplied. This is acknowledged in The Foods Issues Register. When comparing the "B" to a food court retailer's X, the X is already fully assembled as a complete salad with nothing for the customer to do before consumption." This is not accepted. A prepared meal essentially is a meal ready for eating. The product does not need other ingredients added or, cooking before it can be consumed. Salad B only requires the small plastic bag of dressing to be opened and emptied onto the contents of the salad.

The X ingredients within the product have already been sliced and require no further preparation by the consumer. Further the product is packaged with a fork and is therefore marketed as being readily consumed from the package in which it is sold.

The product can be consumed as it is presented in the container, without being further assembled. There are no serving instructions on the label that the product is to be mixed or that the dressing is to be added to the product before consumption and this is a choice left to the consumer.

marketed as a prepared meal

(a) the name of the goods;

The term 'B' commonly refers to a product containing X and other ingredients. Hence, labelling a product 'B' conveys to the customer that the product contains multiple food groups, which collectively would be regarded as a 'meal'. Accordingly, B is a prepared meal, and the name itself effectively markets the product as a prepared meal.

(b) the price of the goods;

The $X price of B having regard to its size is generally in the same range as the competing food options available in other takeaways and restaurants. (see the analysis in 'Salad A - the price of the goods' above).

(c) the labelling on any containers for the goods;

The packaging describes B and sets out the nutritional values of the ingredients.

(d) literature or instructions packed with the goods;

The label states that the serving suggestion is for one person. This indicates that the product is marketed as being for immediate consumption by one person, rather than being marketed as a side dish that is to be consumed with other elements of a meal.

(e) how the goods are packaged;

B is packed in a clear plastic container, with a resealable lid. A small fork is included in the salad. The inclusion of the fork in the packaging provides that the product is marketed as being a meal for immediate consumption.

(f) how the goods are promoted or advertised;

In the convenience stores it is positioned in the X fridges at the front of the store. In medium and large format supermarkets, the same product is sold in the Fresh Produce fridges of the store and sits next to the fresh cuts and leafy salads (see 'A - how the goods are promoted or advertised).

In response to the argument there are similar salads sold in refrigerated areas, each food product has to be examined to ascertain the GST treatment. The circumstances of sales of other similar products within the store are relevant considerations but they are not determinative of the treatment of one particular product. B is marketed as a prepared meal. The salad side-dish type foods that are exhibited next to B in another area of the store do not change the character of B which is marketed as a meal. More importantly, the similar classification argument was unsuccessfully raised by the applicants in the first instance before the Federal Court in Lansell House

Without a further examination of the other similar salads, it cannot be ascertained that these products should be treated as a GST-free supply.

(g) how the goods are distributed

This depends on the format of the supermarket - see above. We are of the view that in the product is being specifically marketed as a prepared meal.

directly compete against takeaways and restaurants

Our comments regarding direct completion and size of product above are applicable to all three salads.

Similarly, any pricing differential between the B $X and those sold in takeaways and restaurants or a relatively smaller size do not prevent the product from being in competition with them since the consumer may prefer to obtain a serving at your supermarkets due to the product's size, quality, convenience or value.

Summary

Taking into consideration the individual elements of marketing, viewed collectively and on balance, salad B is marketed as a prepared meal. As B is food of a kind listed under item 4, it is excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act and is taxable.

Salad C

marketed as a prepared meal

A prepared meal essentially is a meal ready for eating. The product does not need other ingredients added or, cooking before it can be consumed. The product can be consumed as it is presented in the container without being further assembled. There are no serving instructions on the label that the product is to be mixed or that the dressing is to be added to the product before consumption and this is a choice left to the consumer.

These factors would indicate to the consumer that it is a 'meal' and is prepared for consumption.

(a) the name of the goods;

The name: 'C', although not necessarily determinative of whether the product is marketed as a prepared meal, conveys to the consumer that it contains multiple food groups, and is obviously prepared (in terms of being pre-cooked) because the customer would know from the label that it is not a container of uncooked X. Further the description of the X being X also provides that X is ready to eat and does not require any further preparation for the consumer.

(b) the price of the goods;

The $X price of C having regard to its relatively small Xg size is proportionally comparable to competing food options available in takeaways and restaurants.

(c) the labelling on any containers for the goods;

The packaging describes X.

(d) literature or instructions packed with the goods;

There is no information to suggest the product is marketed as a prepared meal or a kind of prepared meal.

(e) how the goods are packaged;

C is packed in a container with a resealable lid allowing it to be marketed for immediate consumption. The package does not include any cutlery but it can be purchased separately for $X. Its placement next to the X products promotes and facilitates the immediate consumption of the C as a take away meal. These factors would indicate to the product is marketed as prepared meal.

(f) how the goods are promoted or advertised;

The product is sold in from the X fridges at the front of the store of the medium to large format supermarkets.

As explained above, in some stores X fridges are specifically signed 'X'. The fridges are also placed at the front of the store within sight of the customer when entering the store therefore the products displayed in these fridges are marketed as quick and easy for immediate consumption away from the premises.

The fact that the 'X' fridges are also referred to internally as 'X' points to the marketing strategy to market such products in the fridges as products that consumers can purchase for a meal, being lunch and for immediate consumption.

Other items that are displayed in these fridges include salads, sandwiches, sushi, drink and yoghurts. These are all items which are typically consumed for lunch. All these factors are consistent with the product being marketed as a prepared meal.

(g) how the goods are distributed

As above, this depends on the format of the supermarket. We are of the view that in the product is being specifically marketed as a prepared meal.

directly compete against takeaways and restaurants

Our comments regarding direct completion and size of product above are re-iterated.

If there are identical or similar products to C sold in takeaways or restaurants, the small Xg size and low cost of $X may be attractive to a segment of the market who would prefer this to those sold in takeaways and restaurants whether similar or greater in size and cost. Therefore, this product is directly competing against takeaways and restaurants.

Summary

Taking into consideration the individual elements of marketing, viewed collectively and on balance, the C salad is marketed as a prepared meal. As this product is food of a kind listed under item 4, it is excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act and is taxable.