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Authorisation Number: 1051316945199

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Date of advice: 5 December 2017

Ruling

Subject: GST classification of various food products

Question

Is the supply of the below listed food products GST-free pursuant to section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Relevant facts and circumstances

You are an Australian company which is registered for GST.

You have run a mobile food truck business that sells a range of food in the local community.

You drive your food truck to the park and sell the following food products:

Product A

Ingredients list supplied

Product AB:

Ingredients list supplied

Product B

Product B ingredients list supplied

Product C

Ingredients list supplied

Product D

Made on site and served hot.

Product E

Made off site

Product F

Ingredients supplied

Product G

Product F

Animal treats

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 Paragraph 38-3(1)(c)

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-3(1)(d)

A New Tax System (Goods and Services Tax) Act 1999 Section 38-4

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-4(1)(a)

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-4(1)(b)

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-4(1)(d)

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-4(1)(e)

Reasons for decision

Summary

The supply of the following food products is GST-free under section 38-2 of the GST Act:

● Product A

● Product AB

● Product B

● Product C

● Product F

● Product G

● Product F

The supply of the following food products is a taxable supply under section 9-5 of the GST Act:

● Product D

● Product E

● Animal treats

Detailed reasoning

The supply of the food products is a taxable supply if the requirements of section 9-5 of the GST Act are satisfied.

Section 9-5 of the GST Act states:

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and

(c) the supply is *connected with the indirect tax zone; and

(d) you are *registered, or *required to be registered for GST.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

(* denotes a term defined in section 195-1 of the GST Act.)

Based on the information provided, the supply of the food products by you satisfy the requirements of paragraphs 9-5(a), 9-5(b), 9-5(c) and 9-5(d) of the GST Act because:

● you supply the food products for consideration.

● the supply of the food products is made in the course of your enterprise.

● the supply of the food products is connected with Australia and

● you are registered for GST.

The supply of the food product is not input taxed under any provisions of the GST Act or any other legislation.

The next step is to determine whether the supply of the food product is GST-free.

GST-free

A supply of food is GST-free under section 38-2 of the GST Act if the products satisfy the definition of food in section 38-4 of the GST Act and the supply is not excluded by section 38-3 of the GST Act.

The term 'food' is defined in paragraph 38-4 (1) of the GST Act as including:

(a) food for human consumption (whether or not requiring processing or treatment);'.

(b) ingredients for food for human consumption;

(c) beverages for human consumption;

(d) ingredients for beverages for human consumption;

Based on the information provided, the products listed other than the Animal treats (see below) in your ruling request satisfy the definition of food under section 38-4 of the GST Act. Therefore next thing to consider is whether the products listed (other than the Animal treats) fall within any of the exclusions in section 38-3 of the GST Act.

Subsection 38-3 (1) of the GST Act excludes certain foods from GST-free status. These include:

● food for consumption on the premises from which it is supplied; or

● hot food for consumption away from those premises; or

● food of a kind specified in the third column of the table in clause 1 of Schedule 1; or the combination of one or more foods at least one of which is food such a kind; or

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

Food for consumption on the premises from which it is supplied;

Paragraph 38-3(1)(a) of the GST Act states that a supply of food for consumption on the premises from which it is supplied is not GST-free.

Section 38-5 of the GST Act provides that premises, in relation to a supply of food, include:

(a) the place where the supply takes place; or

(b) the grounds surrounding a café or public house, or other outlet for the supply; or

(c) the whole of any enclosed space such as a football ground, garden, showground, amusement park or similar area where there is a clear boundary or limit;

but does not include any part of a public thoroughfare unless it is an area designated for use in connection with supplies of food from an outlet for the supply of food.

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’? provides guidance on and examples of situations where the food is considered to be provided on the premises from which it is supplied.

Of particular relevance are examples 3 and 5:

Example 3

9. Kevin has a takeaway food shop which does not have any seating. However, there is a bus shelter on the footpath just outside his shop. Some of his customers eat their food in the bus shelter. The bus shelter is on a public thoroughfare and it is not designated for use in connection with Kevin's shop. It does not form part of the shop premises.

Example 5

11. Sue operates a kiosk which is located within a swimming pool complex. The swimming pool complex is situated within a public park. Although the kiosk sells mainly to pool customers, there is also a window which faces out onto the park. It is the swimming pool complex that is the relevant premises. Food supplied and eaten inside the pool complex is supplied for consumption on the premises. The public park is a public thoroughfare and does not form part of the premises. Food sold through the window to customers in the park is not supplied for consumption on the premises.

You advised us that you have run a mobile food truck business. You drive your food truck to the local park and sell the food products.

We consider that a local park is a public thoroughfare. There is no designated area for you to use in connection with your supplies of the food products. The customers have a choice either to sit on the grass area or take away food. Therefore, the food products which you sell in the local park are not supplied for consumption on the premises.

Next thing we need to consider whether your supply of the individual items will be GST-free or taxable.

As outlined above

● food items will be taxable if listed in the Schedule 1, and

● beverages (or ingredients for beverages) will be taxable unless the beverages (or ingredients) is listed in the Schedule 2 (i.e. if listed will be GST-free).

Product A

Product A ingredients list supplied.

Product A is a food for human consumption as they will be made from ingredients that are food for human consumption. Therefore, Product A is considered to be food for the purposes of the GST Act.

Paragraph 38-3(1)(c) of the GST Act provides that food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1) is not GST-free.

The following items which are listed in Schedule 1 are of most relevance to your products:

Item 29 frozen confectionery, frozen yoghurt and frozen fruit products (but not frozen whole fruit)

Item 31 any *food similar to food listed in items 28 to 30

Item 29 in Schedule 1 (Item 29) identifies 'frozen confectionery, frozen yoghurt and frozen fruit products (but not frozen whole fruit)' as subject to GST. ‘Whole fruit’ does not have to be a single uncut piece of fruit but can be fruit pieces or pureed fruit (provided it is purely fruit without additives such as fruit syrup, sugar, water etc.).

We consider that Product A does not fall under 'frozen confectionery, frozen yoghurt and frozen fruit products’ nor is similar to those items. That is, Product A is not taxable under Item 29 or Item 31. You do not sell Product A in a frozen state. Your supplies of Product A do not satisfy the above requirements to be treated as a frozen confectionery, frozen yoghurt and frozen fruit products.

Furthermore, any other exclusion at paragraph 38-3(1)(d) of the GST Act does not apply to Product A. Accordingly, your supplies of Product A are GST-free under section 38-2 of the GST Act.

Product AB

As outlined above, a beverage is not GST-free Act unless it is a beverage of a kind specified in the third column of the table in clause 1 of Schedule 2 to the GST Act (Schedule 2).

Item 12

Item 12 of Schedule 2 (Item 12) lists non-alcoholic non-carbonated beverages, if they consist of at least 90% by volume of juices of fruits or vegetables.

For the purpose of satisfying the requirement in item 12 it is necessary to determine whether the beverage consists of at least 90% by volume of juices of fruit or vegetables by referring to the constituents of the beverage actually existing at the time the beverage is supplied.

The Product AB is made up of various ingredients which by themselves may be GST-free. However, it is the end product that needs to be considered.

The lists of ingredients and their quantities in each of the Product AB indicate that the Product AB contain mostly frozen liquids and Product F.

Based on the ingredients lists you provided, the Product AB contain more than 90% by volume of specified liquids. Hence, the requirement in item 12 is satisfied and the exclusion at paragraph 38-3(1)(d) of the GST Act does not apply. Therefore, your supply of the Product AB is GST-free under section 38-2 of the GST Act.

Product B

Product B is a food for human consumption. Therefore, Product B is considered to be food for the purposes of the GST Act.

It is necessary to determine if Product B is listed in Schedule 1 to determine if their supply will be GST-free or taxable.

Of most relevance items to Product B is Item 8 of Schedule 1 (Item 8), Item 10 of Schedule 1 (Item 10), Item 11 of Schedule 1 (Item 11) and Item 12 of Schedule 1 (Item 12).

The other items listed in Schedule 1 are not relevant for this particular food product.

Item 8 and Item 10

Item 8 lists confectionery, food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery. Item 10 lists confectionery novelties.

The term confectionery is not defined in the GST Act and therefore, we use its ordinary meaning. Confectionery is defined in the 3^rd edition of The Macquarie Dictionary (Dictionary) to include confections or sweets collectively. Confection is further defined as a sweet preparation (liquid or dry) of fruit or the like.

Product B will have no sugar added throughout the manufacturing process and the food will retain its character as dried fruit. Product B will also not be marketed as confectionery or ingredients for confectionery. Consequently, we consider that Product B do not have the above characteristics to be treated as confectionery or as confectionery novelties, the ingredients for confectionery or as food that consists principally of confectionery.

Item 11

Item 11 lists food known as muesli bars or health food bars, and similar food stuffs.

Muesli bar

The term muesli bar is not defined in the GST Act and therefore takes its ordinary meaning. Muesli is defined in the Dictionary as a breakfast cereal of various mixed products such as oats, wheat germ, chopped fruit and nuts, etc. A muesli bar is defined as a commercially prepared and packaged snack made from a muesli mixture, usually sweetened and set in a bar shape. Some muesli bars also contain confectionery pieces, such as chocolate chips or have a chocolate or yoghurt coating.

Product B does not satisfy the above requirements to be treated as a muesli bar as they consist primarily of dried food.

Health food bar

The term health food bar is not defined in the GST Act. Furthermore, the term is not defined in the Dictionary and there is no generally accepted description of what constitutes a health food bar. Accordingly, the meaning of this term is ambiguous.

Where the meaning of a term is ambiguous, subparagraph 15AB(1)(b)(i) and paragraph 15AB(2)(e) of the Acts Interpretation Act 1901, make it permissible to refer to the explanatory memorandum to the relevant Act in determining the meaning of the provision.

Paragraph 1.3 of the Further Supplementary Explanatory Memorandum to A New Tax System (Goods and Services Tax) Bill 1998 states:

The amendments will ensure that basic food for human consumption is GST-free. In addition, they will ensure that the current WST [wholesale sales tax] exemptions for food are, in general, maintained.

Under the WST system, the following guidelines were developed to indicate the characteristics of muesli bars and health food bars. These characteristics are:

● Muesli bars and health food bars have less than 55% real fruit content.

● Muesli bars and health food bars contain significantly more than 10 per cent added sugars in any form.

● Muesli bars and health food bars have greater than 2% added fat.

● Muesli bars and health food bars are multi component products combining products such as fruits, nuts, cereals, sugars, milk etc.

The Health food bars are also often characterised and distinguished in the market place by their (real or perceived) health giving properties.

Terms that are used to describe health food bars include sweetened with honey, rice syrup or raw sugar; no added artificial colours, flavours or preservatives; high in fibre, low in salt, cholesterol free; a natural product, organic; made with only the best ingredients; a healthy snack; gluten free; dairy free; fat free; and caffeine free. Health food bars also often contain fruit, nuts and seeds.

Product B does not satisfy the majority of the characteristics listed above to be treated as a health food bar.

Other similar foodstuffs

As new products are constantly developed and entering the market place, this discussion is not intended to be exhaustive.

The GST Act does not define the meaning of similar foodstuffs however the word similar is defined in the Dictionary to mean having a likeness, or to resemble these bars, especially in a general way.

Foodstuff is further defined in the Dictionary as a substance or material suitable for food.

Therefore in order to be similar to a muesli or health food bar, the product would need to have a likeness to or resemble of these bars and take the same shape. Other similar foodstuffs may include products such as fruit bars and energy bars.

Product B cannot be considered as being similar to either muesli or health food bars given their appearance, packaging, marketing and ingredients.

Item 12

Item 12 lists crystallised fruit, glace fruit and drained fruit.

Product B have the consistency of dried fruit and are not fruit products as listed in Item 12.

As Product B not excluded by Schedule 1, you will be making a GST-free supply when you sell your Product B.

Product C

Based on the information provided, Product C is a combination of food.

Where a food item is a combination of foods and one of the foods in the combination is listed under an item in Schedule 1, the food item is excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

Product C ingredients are foods not listed in Schedule 1 and they are therefore not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

As such, the supply of Product C will be GST-free.

Product F

Of most relevance is item 12 of Schedule 2 (Item 12) which lists non-alcoholic non-carbonated beverages, if they consist of at least 90% by volume of juices of fruits or vegetables.

Based on the information provided, the cold pressed juice is non-alcoholic and non-carbonated beverages.

Furthermore, the cold pressed juice contains more than 90% by volume of juices of fruits. Hence, the requirement in item 12 is satisfied and the exclusion at paragraph 38-3(1)(d) of the GST Act does not apply. Therefore, your supply of the cold pressed juice is GST-free under section 38-2 of the GST Act.

Product D and E- hot & cold

The items in Schedule 2 that may be applicable to the Product D and E are:

Item 5	tea (including herbal tea, fruit tea, ginseng tea and other similar beverage preparations), coffee and coffee essence, chicory and chicory essence, and malt
Item 7	preparations for drinking purposes that are marketed principally as tea preparations, coffee preparations or preparations for malted beverages
Item 8	preparations marketed principally as substitutes for preparations covered by item 6 or 7

However, clause 2 of Schedule 2 provides that Item 5, 7 or 8 does not include beverages marketed in a ready-to-drink form. Therefore the supplies of a ready-to-drink coffee, cappuccino, or espresso are excluded from being GST-free. Accordingly, your supply of Product D and Product E is taxable supply and GST will be applicable to the supply.

Product G

Item 14 in Schedule 2 (Item 14) provides that a supply of water that is 'natural water, non-carbonated and without any other additives' is GST-free.

Paragraph 4 of GSTD 2000/5 provides that Product G will be GST-free if it is served in its original or takeaway form, that is, the bottle remains unopened and is not served in circumstances indicating that the consumption will take place on the premises.

Based on the information provided, your supply of 'natural water, non-carbonated and without any other additives. Therefore, your supply of Product G is GST-free supply under section 38-2 of the GST Act.

Product F

Product F is considered to be the juice of fruits. Furthermore, this product F is non-alcoholic, non-carbonated and consists of at least 90% by volume of juice and therefore, is a GST-free beverage under item 12 of Schedule 2 of the GST Act.

In addition, the supply of the product F does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, that the supply of the Product F is GST-free under section 38-2 of the GST Act.

Animal treats

Any food labelled or specified for animals is not 'food' under GST law, as it is not for human consumption. Therefore, your supply of Animal treats will be taxable supply and GST will be applicable to the supply.