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Edited version of your written advice
Authorisation Number: 1012916710633
Date of advice: 24 November 2015
Ruling
Subject: GST and food products
Question 1
Is a sale of the Product a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No.
Relevant facts and circumstances
You are registered for GST.
According to the description on your website the Product is '… just like sausage rolls. Mince combined with vegetables, all wrapped up in pastry'. The accompanying photograph of the Product on the website presents the Product in a manner that is consistent with sausage rolls.
The website also provides that the cooking instructions for the Product are 'Oven cook at XC for X minutes.
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
A sale of the Product is a taxable supply under section 38-3 of the GST Act.
Detailed reasoning
Broadly, supplies of food for human consumption are GST-free with certain exceptions such as food for consumption on the premises from which it's supplied, hot food for consumption away from those premises and 'food of a kind specified in the third column of the table in clause 1 of Schedule 1, …'.
Schedule 1 contains item 22 which lists 'pies (meat, vegetable or fruit), pasties and sausage rolls'. Items 20 to 27 are grouped within Schedule 1 under the category 'bakery products'. Clause 2 in Schedule 1 states that 'for … bakery products …. it does not matter whether it is supplied hot or cold, or requires cooking or heating, thawing or chilling prior to consumption'.
To be covered by any item in Schedule 1, a foodstuff simply has to be 'food of a kind' specified in the Schedule.
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.
The words 'of a kind' and their meaning have been considered in a number of other court cases including Hygienic Lily Ltd v Deputy Commissioner of Taxation (NSW) (1987) 13 FCR 399, Sherwood Overseas Pty Ltd v FC of T 1985 and Diethelm Manufacturing Pty Ltd v FC of T 1992.
Gummow J in Hygienic Lily Ltd said:
"...the setting in which the phrase 'goods of a kind' appears suggests it is directed not to the use for which the particular goods in question were designed or manufactured, nor to the purpose to which it is intended those particular goods shall be put, but rather to their nature, quality and adaptation of the goods in the class or genus in question. Thus, goods are 'of a kind ordinarily used for household purposes' if they are to be recognised as members of a class or genus which commonly or regularly (albeit not necessarily exclusively or principally) is used for household purposes: cf Customs and Excise Commrs v Mechanical Services (Trailer Engineers) Ltd [1979] 1 WLR 305 at 312-13, 315, 316-17."
When classifying a food, the term 'food of a kind specified' is a question of whether the product comes within the genus, class or description of the item listed. This contrasts with classification by other means such as product name.
Where a term is not defined in the legislation the ordinary meaning is used. Sausage roll is not defined in the legislation; the Macquarie Dictionary (2013) defines a 'sausage roll' as a roll of baked pastry filled with sausage meat.
On your website described the Product as '… just like sausage rolls. Mince combined with mixed vegetables, all wrapped up in pastry'. Our understanding is that the Product is a sausage roll or at the very least 'food of a kind', belonging to the genus class or description of sausage roll. The photograph of the Product on the website presents it in a manner that is consistent with sausage rolls. We consider that the Product fits the definition of a sausage roll and bears the characteristics of a sausage roll. Further, the Product is marketed as being 'just like a sausage roll'. Therefore we consider that sale of the Product should be subject to GST.