Edited version of your written advice

Authorisation Number: 1013008299615

Date of advice: 9 May 2016

Ruling

Subject: Good and Services Tax (GST) and salads

Question 1

Is your supply of salads considered to be food for consumption on the premises from which they are supplied for the purposes of paragraph 38-3(1)(a) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No

Question 2

Are you making a GST-free supply in accordance with section 38-2 of the GST Act when you supply packaged or pre-packaged take-away salads?

Answer

No

Relevant facts and circumstances

You carry on an enterprise as a take-away food provider supplying salads.

You are registered for GST.

You supply food inside the X Market and trade as X.

The salads are already assembled and dressed. They are displayed on platters from which the customers can choose the type, combinations and sizes. You offer salads as side dishes containing a mix of grains, nuts, fruit, vegetables and condiments of choice.

Some salads are light and fluffy and others are denser. Your pricing is based on volume. Your salad containers vary from Small (single side serve), Medium (2 side serves), Large (3 side serves) and Family (5 side serves).

Disposable cutlery, serviettes and takeaway bags are provided.

When the customers make their choices, the salads are then packaged in clear containers with only X logo on it. The packaging does not differentiate between dine in or take away. The packaging does not provide any instructions on how to eat the salads.

You do not provide tables or other places for the customers to eat the food. You do not provide trays to carry out the meals or table service. There is a food court situated a long distance away from the shop with a variety of food options and a seating area. There is some temporary seating opposite the shop which will be removed when a new tenant arrives shortly. There is no eating area in the surrounds of the market as it is in a built up area.

You believe that most customers take the salad home to accompany a cooked meal.

Your menu is on a menu board outside the shop and on your website.

Your website states that you provide side dishes to compliment other take home foods.

You are the only salad bar in the market and market management does not allow any direct competition between shops.

The Market has your shop on its website. You have a quote on this website inviting people to come to the market and saying 'grab yourself a healthy meal'.

Your contentions

1. Salads are not marketed as a prepared meal and so are GST-free. The salads are marketed as a side dish. You make no mention that your salads are to be eaten as a meal.

2. If a supply of GST-free food is reasonably anticipated to be consumed away from the premises, then it remains GST-free. Your salad packaging does not differentiate between dine in/take away and you do not do table service (ie with trays etc). The salads are not of a kind specified in Schedule 1 to the A New Tax System (Goods and Services Tax) Act 1999 (Schedule 1).

3. Other reference items are ATO ID 2001/679, PBR 77259

(ATO ID 2001/679 held that the entity is making a GST-free supply under section 38-2 of the GST Act when it sells prepared salads that are not marketed as a prepared meal.)

Relevant legislative provisions

All legislative references are to the GST Act:

Section 38-2

Subsection 38-3(1)

Paragraph 38-3(1)(c)

Paragraph 38-4(1)(a)

Schedule 1

Reasons for decision

Question 1

Section 38-2 of the GST Act provides that a supply of food is GST-free. However, paragraph 38-3(1)(a) of the GST Act states that a supply is not GST-free under section 38-2 if it is a supply of food for consumption on the premises from which it is supplied.

Therefore, a supply of food that would otherwise be GST-free becomes a taxable supply by virtue of paragraph 38-3(1)(a) if it is for consumption on the premises from which it is supplied. 

Section 38-5 of the GST Act defines premises as meaning amongst other things, the place where the supply takes place. Goods and Services Tax Determination GSTD 2000/4 Goods and services tax: what does the word 'premises' mean in the expression, 'a supply of food for consumption on the premises from which it is supplied'? gives further guidance on what is considered to be premises for a supply of food for consumption on the premises from which it is supplied. Premises include amongst other things the grounds surrounding restaurants, cafes, snack bars, hotels, clubs, reception lounges and venues for catered functions.

You advised that this is a takeaway shop and no food is consumed on the premises. Whilst there is temporary seating several metres away, the salads are not served on a tray or at these tables so there is no indication at the point of sale that the salads will be consumed on this part of the premises or the broader premises in the food court some distance away or surrounds. This means the salads are not supplied as food for consumption on the premises from which they are supplied.

Question 2

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 and the supply is not excluded from being GST-free by section 38-3.

The definition of food in section 38-4 of the GST Act includes food for human consumption, whether or not requiring processing or treatment. The salads you sell in your food outlet are food for human consumption.

However, paragraph 38-3(1)(c) provides, amongst other things, that a supply of food is not GST-free if it is a supply of:

• 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 a kind.

Relevant to paragraph (c) above and the food products at issue is the category of 'prepared food' in Schedule 1 and more specifically, item 4 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)).

Meal

A food must be a 'meal' before the issue of its preparation is considered for the purposes of item 4. The term 'prepared meal' is not a defined term in the GST Act and will therefore bear its ordinary meaning.

The Macquarie Dictionary (Dictionary) states that the term 'meal' means 'the food eaten or served for a repast' and 'one of the regular repasts of the day, as breakfast, lunch, or dinner.' This definition could be applied to a single food item or to a meal consisting of several food items.

The term 'repast' as breakfast, lunch, or dinner implies more substantial than snacks or side dishes. 'Snack' is defined in the Dictionary as: 'a small portion of food or drink; a light meal' and 'to eat small portions of food at times other than meal times'.

The salads in question are considered to be meals and not snacks as they contain combinations of food components normally associated with repast meals.

Prepared meal

Once a food is accepted as being a meal, its status as a 'prepared meal' under item 4 must satisfy the conditions outlined in clauses 2 and 3 of Schedule 1. Clause 2 of Schedule 1 provides that prepared food can be supplied hot, cold or frozen or require cooking, heating, thawing or chilling prior to consumption and clause 3 of Schedule 1 provides that prepared food requires refrigeration or freezing for its storage.

The salads are prepared meals as they are mixed, dressed and ready for consumption. The foods at issue satisfy both clauses 2 and 3 of Schedule 1 as they are ready for consumption when supplied and require refrigeration for storage.

Paragraph 2 of the Goods and Service Tax Industry Issue - Food partnership Prepared Food provides that the term "prepared meal" is intended to cover a range of food products that:

• directly compete against takeaways and restaurants

• require refrigeration or freezing for storage, (already accepted above) and

• are marketed as a prepared meal.

Directly compete with takeaways and restaurants

Your meals are in direct competition with other takeaways and restaurants in the Market and beyond. Competition is not limited by close proximity of takeaways and restaurants and can apply to the purchaser taking the meal away for consumption at another location.

Marketed as a prepared meal

In determining whether food is marketed as a prepared meal the activities of the seller are relevant. Consideration is given to the following:

• the name of the goods

• the price of the goods

• the labelling on any containers for the goods

• literature or instructions packed with the goods

• how the goods are packaged

• how the goods are promoted or advertised and

• how the goods are distributed.

Consideration is also given to the actual product specifications, labelling, pricing, labelling and marketing as well as any cooking instructions.

The salads contain cold salads, other ingredients and are dressed and packaged in take away cardboard or plastic containers and are not intended for consumption on the premises.

All your salads are supplied assembled and dressed ready for consumption. The fact that your salads do not include any meat protein or meat products does not preclude them from being a prepared meal. The ingredients that make up most of your salads include chick peas, beans, rice, noodles, lentils and tofu which are alternative protein products. Therefore, depending on consumer preferences, a vegetarian person or a non-vegetarian person may choose to consume the salads as a prepared meal.

Stating that the salads are side dishes does not override the fact that the balance of the marketing criteria point to the products as being meals. Having regard to the nutritional combinations and balance of the salads, they are capable of being meals in themselves and aspects of the marketing are evidence of this:

• the placement of your outlet in the eatery section of the Market,

• the packaging in containers from which the meals can be eaten

• the pricing of the salads are comparable to takeaways and/or restaurants and are ready to eat with cutlery and serviettes provided.

• your entry in the Market website specifically refers to meals: " grab yourself a healthy meal…".

It is considered that your salads satisfy both clauses 2 and 3 of Schedule 1 as the salads are ready for consumption when supplied and they require refrigeration for storage. The salads are assembled, dressed and placed in a takeaway container and are marketed as a prepared meal. This applies both to salads which are packaged and pre-packaged.

Therefore, we consider that your salads are marketed as prepared meals listed in Clause 1, Item 4 of Schedule 1, and are excluded from being GST-free by virtue of paragraph 38-3(1)(c).

ATO ID 2001/679

This ATO ID was withdrawn on 7 October 2005 and does not contain the ATO view. The ATO view on this issue is contained in the Food Industry Partnership Issues Register - Issue 5 - Prepared food.