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Edited version of private advice
Authorisation Number: 1051636888562
Date of advice: 19 February 2020
Ruling
Subject: Goods and services tax and food
Question
Is the food product "sandwich filling" GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes
The scheme commences on:
The issue date of this notice of private ruling.
Relevant facts and circumstances
You are a small and medium business. You make a type of sandwich filling which is an ingredient for a food or beverage for human consumption.
The product is to be consumed as a sandwich filling with the end user separately purchasing and using bread and various salad products.
It is packaged sealed in a vacuum pack and stored in refrigerated conditions to extend shelf life. The product is "stand alone" and not sold with any other food product. The product is not packaged as a "platter".
The product is manufactured by third party and sold to your customers.
The product is not marketed as a prepared meal and is sold to supermarkets, schools, hospitals, clubs and cafes.
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 Schedule 1
Reasons for decision
A supply of food is GST-free under section 38-2 of the GST Act if it satisfies the definition of food in section 38-4 of the GST Act and it is not excluded by section 38-3 of the GST Act.
Food is defined in section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment). The sandwich fillings satisfies the definition of food in paragraph 38-4(1)(a) of the GST Act as food for human consumption.
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 that is specified in clause 1 of Schedule 1 to the GST Act (Schedule 1). The sandwich fillings are not specifically listed in Schedule 1. As such, the issue is whether sandwich fillings are 'food of a kind' specified in Schedule 1.
Of a kind
The phrase 'of a kind' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that term. The Macquarie Dictionary (1997) 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 kind of hero. 4...
In sales tax cases and when determining the phrase 'of a kind', the Courts have determined the 'essential character of the goods'. Essential character derives from the basic nature of the goods, from what they are, though composition, function and other factors necessarily play a part.
The GST case Lansell House Pty Ltd & Anor FC of T 2010 ATC 10851 (Lansell 2010) did not provide an essential character test, rather it provided an overall impression test. Sunberg J held that the words in item 32 are not used in a specialised or trade sense that differs from their ordinary usage and that it is a matter of overall impression in deciding the proper classification of a product. Note that this Federal Court decision has been upheld by the Full Federal Court; hence this quote from the Federal Court decision is still relevant.
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 addition, the case law Lansell House Pty Ltd & Anor v FC of T 2011 ATC 20-239 (Lansell 2011) at [30] relevantly provides:
The use of the words "of a kind" in s 38-3(1)(c) of the GST Act adds further generality to the description of the items described in Schedule 1: Air International Pty Ltd v Chief Executive Officer of Customs (2002) 121 FCR 149 per Hill J. Thus, a new product that does not possess all of the same characteristics of known crackers may nevertheless be within the relevant item...
Accordingly, it is considered that food will be 'food of a kind' listed in Schedule 1 if it is food belonging to the same class or genus as food listed in Schedule 1.
Item 2 of Schedule 1 lists 'sandwiches (using any type of bread or roll)'. In order for the sandwich fillings to belong to the same class of food as 'sandwiches (using any type of bread or roll)' they would need to have already been made. As the sandwich fillings are only an ingredient that can be used for the making of sandwiches or rolls, they are not considered to be 'food of a kind' known as 'sandwiches (using any type of bread or roll)'.
Item 4 of Schedule 1 lists 'food marketed as a prepared meal, but not including soup'. As the sandwich fillings are not intended to be or marketed as a prepared meal this item does not apply.
The sandwich fillings are not food of a kind specified in Schedule 1. Furthermore, the supply of the sandwich fillings does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the supply of the sandwich fillings is GST-free under section 38-2 of the GST Act.