Edited version of your written advice

Authorisation Number: 1013078025049

Date of advice: 24 August 2016

Ruling

Subject: Goods and services tax (GST) and sale of meal solution products

Question

Are your sales of the specified 'meal solution' products GST-free?

Answer

Yes.

Relevant facts and circumstances

You are registered for GST.

You are currently developing specified 'meal solution' products that you plan to sell in the future under the specified brand name.

In your ruling application form, you described these products as meal solutions and meals. You designed the products listed above with the aim of satisfying the complete prepared meal market.

Your customers will on-sell the products.

Each of the four products listed above contains a main, which includes meat and a side component (example, rice, vegetables).

Each product is (number) grams. Each product is packaged in a box. Each box contains two shelf stable pouches - one for the main and one for the side. The pouches have a (number) year shelf life.

The specified products do not require refrigeration or freezing for their safe storage while in an unopened state and you do not refrigerate or freeze the products. The labelling of the products does not state that the products require refrigeration or freezing until after the packaging is opened. Middle-men may choose to store the products in a refrigerator at their discretion, but the products can be moved into and out of refrigerated environments; the only stage at which refrigeration is required is after the various pouches have been opened.

You detailed the ingredients of the specified products.

The end consumer must combine the ingredients and heat the product before consumption and may choose to add topping with additional ingredients to suite their taste.

You detailed the heating instructions on the packaging of each product.

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

Your sales of these products are GST-free as food under section 38-2 of the GST Act as they are food for human consumption and none of the exclusions in subsection 38-3(1) of the GST Act apply.

The products are not covered by item 4 in the table in clause 1 of Schedule 1 (Item 4) because:

• they require some assembly of ingredients by the end consumer

• the product would not compete directly with restaurants and take-away shops

• the products do not require refrigeration or storage in an unopened state

Detailed reasoning

The relevant GST exemption provision for all of the products in question is section 38-2 of the GST Act.

A supply of food is GST-free under section 38-2 of the GST Act provided that the supply does not come within any of the exclusions listed in subsection 38-3(1) of the GST Act.

Food is defined in section 38-4 of the GST Act to include food for human consumption (paragraph 38-4(1)(a)). The four meal products you have specified are food for human consumption. Therefore, they satisfy the meaning of food in section 38-4.

In your case, the relevant exclusion provision to consider in subsection 38-3(1) is paragraph 38-3(1)(c), which provides that food of a kind specified in the third column of the table in clause 1 of Schedule 1 to the GST Act, or food that is a combination of one or more foods at least one of which is food of such a kind, is not GST-free under section 38-2 of the GST Act.

Item 4 in the table in Schedule 1 (Item 4) is 'food marketed as a prepared meal, but not including soup'. However, clause 3 in Schedule 1 states 'Item 4 in the table only applies to *food that requires refrigeration or freezing for its storage'.

The term 'prepared meal' is not defined in the GST Act and will therefore bear its ordinary meaning.

The Macquarie Dictionary provides that 'meal' means 'the food eaten or served for a repast'. This definition could be applied to a single food item or to a meal consisting of several food items. Therefore, for a product to potentially be a prepared meal, it must be capable of being eaten as a meal in its own right.

The Macquarie Dictionary defines 'prepare' in relation to food as 'to get ready for eating, as a meal, by due assembling, dressing or cooking'.

The Further Supplementary Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998 ("the EM") provides guidance on item 4.

The GST Food Guide on the Australian Taxation Office website provides the following guidelines on prepared meals:

Prepared meals are taxable. A 'prepared meal' is a food that meets the following three conditions:

• it directly competes with takeaways and restaurants

• it needs refrigeration or freezing for storage

• it is marketed as a prepared meal but is not soup.

Examples of prepared meals (as stated in the EM) include:

• curry and rice dishes, mornays and similar dishes sold cold that only need reheating to be ready for eating

• fresh or frozen lasagne

• sushi

• cooked pasta dishes sold complete with sauce

• frozen TV dinners

• fresh or frozen complete meals (for example, a single serve of a roast dinner, including vegetables or a low fat dietary meal).

All these meals, except sushi, only need reheating for them to be ready to eat. Sushi is ready to eat when it is prepared even though part of it is raw. It does not matter whether prepared meals are supplied hot or cold, or need cooking or reheating.

Salads, including pasta, rice, coleslaw, meat, seafood and green salad, sold from salad bars at supermarkets in either the delicatessen section or from a self-serve bar, are GST-free only if they are not marketed as prepared meals.

Examples of food items that are not prepared meals include:

• frozen vegetables

• kebabs (uncooked skewered meat)

• marinated meats and stir-fries

• uncooked pasta products

• fish fingers

• baby food, baked beans, spaghetti and Irish stews that do not require refrigeration or freezing.

Uncooked pasta products are not prepared meals. Canned baby food, baked beans and spaghetti are not prepared meals as they do not need refrigeration or freezing (until opened) for their storage.

When working out whether food is a prepared meal, consider:

• how the goods are promoted or advertised

• the name, price, labelling, instructions, packaging and placement of the goods in the store.

Example: Prepared meals

A supermarket sells lasagne in a box from the frozen food section. The instructions on the box say that the product can be reheated by oven baking or microwave.

The lasagne is a prepared meal as the product only needs heating, before serving.

In accordance with the GST Food Guide all of the meals listed in the EM, except sushi, only need reheating for them to be ready to eat. Sushi is ready to eat when it is prepared even though part of it is raw. Therefore, a product must be supplied fully assembled and dressed (if applicable) for consumption in order to potentially be a prepared meal.

The following factors are relevant in determining whether the specified products are foods marketed as prepared meals:

• the products contain a main and a side and sauce and seasoning

• the size of each product is suitable for a meal or two meals

• one of your products contains the components of a curry and rice dish, and curry and rice dishes are specifically listed in the EM as an example of prepared meals

• the names of the products in your case are the names of well-known meals

• you have designed the products with the aim of satisfying the complete prepared meal market, and

• whether the end consumer adds toppings with additional ingredients is optional.

However, we do not consider that the specified products are prepared meals because some assembly of ingredients is required to be done by the end consumer. That is, each product comes in two pouches - one for the main and one for the side and the end consumer must pour out the contents of the pouches and bring these two components together. The specified products can be contrasted to the lasagne example above because the specified products require more than heating to be ready for consumption.

Additionally, the specified products you sell would not directly compete with restaurants and take-away shops, because they are not fully assembled, whereas meals from restaurants and take-away shops are fully assembled.

Furthermore, although some middle-men may choose to refrigerate your products at their discretion, the products do not require refrigeration or freezing for their storage in an unopened state.

Therefore, they are not covered by item 4. Additionally, they are not covered by any of the other items in Schedule 1 and they are not foods that are a combination of foods at least one of which is food of a kind set out in Schedule 1. Therefore, the exclusion at paragraph 38-3(1)(c) of the GST Act does not apply.

None of the other exclusions at subsection 38-3(1) of the GST Act apply. Therefore, your sales of the products are GST-free under section 38-2 of the GST Act.