Edited version of your written advice

Authorisation Number: 1051462990757

Date of advice: 04 December 2018

Ruling

Subject: Goods and Services Tax (GST) and a supply of frozen fruit bread

Question

Is a supply of the frozen fruit bread by you GST-free pursuant to section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No, the supply of your frozen fruit bread is a taxable supply under section 9-5 of the GST Act and subject to GST.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are an Australian entity which is registered for GST.

You supply the frozen fruit bread to consumers in Australia.

The Ingredients in the fruit bread are:

● Flour (wheat flour, Thiamine)

● Fruit - 33%

● Sugar

● Egg pulp

● Canola oil

● Baking powder

● Vanilla

● Cinnamon powder

The baking process for your fruit breads is as follows:

All the ingredients are mixed in a large dough mixer.

Then portioned into bread tins and based in a rational oven.

Take bread tins out of the oven, cool down.

The light golden syrup is brushed on the top of the loaf after baking.

Then the fruit bread is blast frozen before packing.

You shrink wrap the fruit bread and then box it into four loaves per box.

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

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, your frozen fruit bread is food for human consumption and therefore satisfies definition of food in paragraph 38-4(1)(a) of the GST Act.

However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1).

Based on the description and ingredients of your frozen fruit bread, we consider the relevant items listed in Schedule 1 are Item 20 and Item 27.

Foods listed under item 20 of Schedule 1 are 'cakes, slices, cheesecakes, pancakes, waffles, crepes, muffin and puddings and foods listed under item 27 of Schedule 1are bread (including buns) with a sweet filling or coating'. The foods listed under these items would include food of a kind specified in Schedule 1.

Fruit Bread

As the fruit bread is not listed under Schedule 1 (Items 20 and 27), we need to consider whether the frozen fruit bread is food of a kind a cake under item 20 or a bread product under item 27.

The words "cake" and "bread" as described in Schedule 1 is not defined in the GST Act and therefore they take on the ordinary meaning. The meanings of these words are defined in The Macquarie Concise Dictionary (3^nd Edition) (Dictionary) as follows:

Cake

1. a sweet baked food in a loaf or layer form, made with or without shortening, usually with flour, sugar, eggs, flavouring, baking powder or soda …

3. to form into a cake or compact mass

4. to be formed into a cake or compact mass…

Bread

1. a food made of flour or meal, milk or water, etc. made into dough or batter with or without yeast or the like, and baked

Food of a kind specified in Schedule 1

The phrase 'of a kind' is also not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that term. The Dictionary does not define the entire phrase 'of a kind' however; it defines the word 'kind' to mean:

'1. A class or group of individuals of the same nature or character, especially a natural group of animals or plants. 2. Nature or character as determining likeness or difference between things: things differing in degree rather than in kind. 3. A person or thing as being of a particular character or class: he is a strange king of hero. 4...'

Accordingly, something will be 'of a kind' if it is of the same nature or character (possessing the same distinguishing qualities) as the thing or group in question. In this case, we are going to look into the nature, character and ingredients for your frozen fruit bread and determine where it is a kind of a cake or bread product.

Based on information provided, it is considered that the frozen fruit bread has the nature, character and ingredients of a cake product. The ingredients in your frozen fruit bread are fruits, wheat flour (thiamine), eggs, sugar, baking soda, canola oil, and baking powder, vanilla and cinnamon powder. The ingredients contain sugar and therefore your frozen fruit bread is sweet. The other ingredients are eggs, baking soda, etc., which are essential ingredients for baking a cake. In addition, your frozen fruit bread is made by mixing all ingredients in a bowl, deposit the mix into a tin for baking in the oven. Therefore, we consider your frozen fruit bread is a cake and food of a kind listed under item 20 of Schedule 1. Your frozen Fruit bread is therefore excluded being GST-free by paragraph 38-3(1)(c) of the GST Act.

Based on the ingredients and the baking process, we do not consider your frozen fruit bread to be food of a kind of a bread product and therefore there is no requirement to consider your frozen fruit bread under item 27 of Schedule 1. A bread product is made of flour, milk or water, etc. The flour and water are made into dough with or without yeast and then baked.

Accordingly your frozen fruit bread is food of the same class as cakes and is therefore considered to be food of kind specified in Schedule 1. As such your supply of the frozen fruit bread is not GST-free under section 38-2 of the GST Act.

Taxable supply

The supply of your frozen fruit bread is a taxable supply if the requirements of section 9-5 of the GST Act are satisfied.

Section 9-5 of the GST Act provides that you make a taxable supply if:

(a) you make the supply for consideration

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

(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.

Based on the information provided, the supply of the frozen fruit bread by you satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act because:

(a) you supply the frozen fruit bread for consideration;

(b) the supply of the frozen fruit bread is made in the course of your enterprise;

(c) the supply of the frozen fruit bread is connected with Australia; and

(d) you are registered for GST.

Furthermore, the supply of the frozen fruit bread by you is not input taxed or/and GST-free under any provisions of the GST Act or any other legislation.

Accordingly, the supply of the frozen fruit bread by you will be a taxable supply and subject to GST.