Edited version of your written advice

Authorisation Number: 1013067131983

Date of advice: 10 August 2016

Ruling

Subject: GST and salads

Question

Is X (you) making a GST-free supply in accordance with section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you supply take-away salads?

Answer

No

Relevant facts and circumstances

You are a GST registered partnership.

You trade as Y and supply food inside the A Market. You also provide a catering service.

The salads are assembled by you and the dressing added. They are displayed on refrigerated platters from which the customer can choose the type, combinations and sizes.

The menu on your website markets take-home salads and your catering service. The website states that your salads are side dishes to accompany meals.

There are various possible salad combinations. In the past you have served over 70 different salads from traditional to original salads focusing on premium quality seasonal ingredients.

Your marketing is centred around the salads not as a meal but to be taken elsewhere as an accompaniment for another dish. They comprise vegetables, nuts, beans, lentils rice, noodles and chickpeas etc. but no meat or fish.

Only one type meal is on offer which is the only meal option which you specifically market as a prepared meal. You are not seeking a ruling on this meal but mention it to differentiate it from the marketing of the other salads.

Marketing

Online: You have an online account, a website and a page on a Market website.

Your website explains what you do, has some pictures and a sample list of salads with prices.

Target audience: You are not targeting anyone specifically and your aim is to have a favourite salad for everyone. All of your salads are vegan friendly and don't contain meat, so that they are suitable for all.

X Market

The market contains specialty food and produce and places to eat.

There are about xx shops in total containing: fruit and vegetable stalls, butchers, specialty stores, various eateries, merchandise and specialty services. Your shop is listed in the Specialty Foods section. It is represented on the relevant website making a range of gourmet salads.

Each shop is allowed to only sell what is authorised by market management. In your case you are authorised to sell a range of freshly made salads including soups and freshly squeezed fruit and vegetable drinks.

There is some common seating around the market, which is controlled by the market and moves around from time to time. Although you have space outside your shop, you have no dedicated seating.

Cutlery

Plastic cutlery is not given as a matter of course with a salad. It is situated behind the counter. You only offer it verbally at the same time as offering a carry bag.

The cutlery is generally used for non-salad items.

Packaging

Your salad containers come in a range of sizes. The containers are clear and plain with your logo. Once filled up with salad, a lid is placed on top. A carry bag is also offered. The containers and bags have no labels or instructions.

The costs of your containers range from X cents to X cents and each have a logo sticker for an additional X cents. You use these containers because they look good and will keep the salad fresher for longer.

You have four sizes of salad containers: Your website and shop signage provides a description of the serving sizes as follows:

● Small: Xml container = 1 side dishes

● Medium: Xml container = 2 side dishes

● Large: Xml container = 3 side dishes

● Family: Xml container = 5 side dishes

● A cardboard box is used for the only meal option.

Pricing

Your salad pricing is about 2.5 times the cost of produce and ranges from $X - $X, with the more you buy, the better the price you get.

Salad catering is $X per head (for over X people) and $X per head (for fewer than X).

You do not provide tables or other places for the customers to eat the food. You do not provide trays to carry out the salads or table service. There is a food court elsewhere in the Market with a variety of food options and a seating area.

Taxpayer's contention

You intentionally promote the salads as side dishes. You state that from the majority of the feedback you have received, your salads are generally used to compliment another meal or as another side dish option for a catering spread. You generally observe approximately XX% of your customers just passing through the market (on-the-go) and taking their salads home or elsewhere.

Your shop is very unique and is compared to a salad bar inside a gourmet supermarket. It was authorised to be part of the market for the purpose of complimenting what other stall holders have on offer.

Relevant legislative provisions

All legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act):

Section 38-2

Subsection 38-3(1)

Paragraph 38-3(1)(c)

Paragraph 38-4(1)(a)

Schedule 1

Reasons for decision

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 to the GST Act (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)).

Prepared meal

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, even though without meat or fish, are considered to be repast meals due to their combinations of food components such as nuts, beans, lentils rice, noodles and chickpeas.

The salads are prepared meals as they are prepared in front of the customer.

“Prepared meal" is intended to cover a range of food products that:

● directly compete against takeaways and restaurants

● require refrigeration or freezing for storage, 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. Even though you market them as side dishes, they are able to be consumed as meals in themselves in preference to takeaways and restaurants.

require refrigeration or freezing for storage

All of the salads require refrigeration for storage.

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.

Specific advertising of the salads as side dishes does not override the true character of the marketing. In your situation it is considered that your salads are prepared meals and while some of the criteria for marketing as a prepared meal is not determinative either way, such as the name of the salads, labelling or literature, the salads are still being marketed as prepared meals as:

● they are packaged and sold in containers in the form of a meal, whether or not cutlery is provided at the point of sale for immediate consumption in the Market seating area or for later consumption at home or elsewhere with one's own cutlery,

● they are generally consistent with prices of takeaway salads.

Therefore, we consider that your salads are marketed as prepared meals and are not excluded from being GST-free under section 38-2 of the GST Act.