Edited version of private advice

Authorisation Number: 1051733625883

Date of advice: 13 August 2020

Ruling

Subject: GST and pureed food

Question

Is the supply of the different ranges of pureed products (the Products) GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

The supply of the meat and vegetable ranges is GST-free under section 38-2 of the GST Act.

The supply of the desserts range is not GST-free under section 38-2 of the GST Act. The supply of the desserts range is a taxable supply.

Relevant facts and circumstances

You are in the business of selling pureed meat, vegetable and dessert products.

You are registered for GST.

The Products are supplied in frozen tubs of a particular weight.

The Products are not plated ready to go meals. One would take a portion of meat then add a serving of vegetables and carbohydrate to create a meal. The desserts can be eaten on their own.

You provided a brochure and the list of the different types of pureed products.

The desserts range include cakes and slices and their ingredients include egg, sugar, butter, flour and milk powder.

Detailed reasoning

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 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act.

Food is defined to include food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act). The Products satisfy the definition of food as being food for human consumption.

However, subsection 38-3 of the GST Act provides that a supply of food is not GST-free if, amongst other things, it is a supply of food of a kind specified in the third column of the table in clause 1 of Schedule 1, or food that is a combination of one or more foods at least one of which is food of such a kind (paragraph 38-3(1)(c) of the GST Act).

The Products are not specifically listed in Schedule 1. As such, the issue is whether the Products are 'food of a kind' specified in Schedule 1.

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 ...'

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 lawLansell House Pty Ltd & Anor v FC of T 2011 ATC 20-239 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, 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.

Changing the texture of food does not make the supply GST-free if in its original state the supply of the food is taxable.

The meat and vegetable ranges

Of relevance when considering the GST treatment of the supply of the meat and vegetable ranges is item 4 in the table in clause 1 of Schedule 1 of GST Act (item 4), which lists 'food marketed as a prepared meal, but not including soup'. Clause 2 of Schedule 1 of GST Act provides that prepared food can be supplied hot, cold or frozen or require cooking, heating, thawing or chilling prior to consumption and clause 3 of Schedule 1 of GST Act provides that item 4 only applies to food that requires refrigeration or freezing for its storage.

The term 'prepared meal 'referred to in item 4 is not defined in the GST Act and therefore takes its ordinary meaning.

In the context of food, 'prepare' is defined in the Macquarie Dictionary Online as:

2. to get ready for eating, as a meal, by due assembling, dressing, or cooking.

And meal as:

noun 1. one of the regular repasts of the day, as breakfast, lunch, or dinner.

2. the food eaten or served for a repast.

Essentially therefore, a prepared meal would be a 'repast ready for eating'.

The ATO view on what is a 'prepared meal' is provided in Issue 5 of the Food Industry Partnership - Issues Register (Issue 5). This issue and all the information within it is a public ruling for the purposes of section 105-60 of Schedule 1 to the Taxation Administration Act 1953.

Issue 5 provides that for food to be regarded as a "prepared meal" in accordance with item 4, the food needs to be supplied assembled and dressed (if applicable). It is considered that making dressing available will satisfy this requirement, as it allows the consumer to add the level of dressing to meet their personal tastes.

In addition, if the food is cooked or partly cooked and is to be served hot, it should only need heating, which may include completion of the cooking process, to be ready for consumption. Heating will be interpreted to mean warmed in the microwave oven, convection oven, frying pan, wok or saucepan.

Issue 5 provides that 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.

Consideration is also given to the actual product specifications, labelling, pricing, labelling and marketing as well as any cooking instructions

A lack of promotional or advertising activities by the supplier (including a wholesaler) does not result in the product not being marketed as a prepared meal. How a product is marketed is determined by "the total process whereby goods are put onto the market" (Cascade Brewery Company Pty Ltd & Anor v FCT (2006) ACT 4339 23.

The term 'marketed', in the context of 'marketed as a prepared meal' suggests the aim of the supplier, determined objectively, is to present the goods as being a prepared meal. Therefore when examining the characteristics of a product, all the relevant factors will be looked at together in deciding the proper classification of the product. That is the classification decisions for GST purposes are often questions of fact and degree, a matter of overall impression and a combination of fact finding and evaluative judgment. (Lansell House Pty Ltd & Anor v FCT 2010 ATC 20-173, at paragraph 108)

The meat and vegetable ranges are supplied in frozen tubs of a particular weight. They are not sold as plated ready to go meals. One will take a portion of meat then add a serving of vegetable to create a meal.

The packaging, promotion and assembly required prior to consumption do not support characterising the meat and vegetable ranges as "food marketed as a prepared meal". We do not consider that the meat and vegetable ranges of frozen food products are prepared meals of a kind covered by item 4. Consequently, the exclusion in paragraph 38-3(1)(c) does not apply. The supply of the meat and vegetable ranges does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the supply of the meat and vegetable ranges is GST-free under section 38-2 of the GST Act.

The desserts range

Of relevance when considering the GST treatment of the supply of the desserts range is item 20 in the table in clause 1 of Schedule 1 of GST Act (item 20), which lists bakery products "cakes, slices, cheesecakes, pancakes, waffles, crepes, muffins and puddings".

It is considered that for this case, the relevant foods listed in item 20 are cakes and slices.

The term 'cake' is not defined in the GST Act so the ordinary meaning is applied for interpretation purposes. However, in the application of item 20 the other products specified (i.e. slices, cheesecakes, pancakes, waffles, crepes, muffins and puddings) provide the context of what is meant by cake (or 'of a kind' of cake) for the purposes of this provision.

The Macquarie Dictionary Online defines "cake" as, among others, as "a sweet baked food in loaf or layer form, made with or without shortening, usually with flour, sugar, eggs, flavouring, and a liquid". "Slice" is defined, among others, as "any of several cakes or biscuits cooked or formed as a thin slab and cut into rectangular pieces".

The ingredients of the dessert range include egg, sugar, butter, flour and milk powder. The description for the dessert range are those of a cake or slice. The pictures on your website show the desserts range in an original format of a cake or slice and in the pureed form.

Based on the above, it is considered that the desserts range has the nature, character and ingredients of a cake or slice product. We consider this range to be within the meaning of the word cake or slice, or is food 'of a kind' of cake or slice. Therefore, the desserts range is food of a kind specified in item 20.

Accordingly, the desserts range is excluded from being GST free by paragraph 38-3(1)(c) of the GST Act. Hence, the supply of the desserts range is not GST-free under section 38-2 of the GST Act.

The supply of the desserts range is a taxable supply as all the requirements of section 9-5 of the GST Act are satisfied as follows:

• you supply the desserts range for consideration
• the supply is made in the course or furtherance of an enterprise that you carry on
• the supply is connected with the indirect tax zone
• you are registered for GST and
• the supply of the desserts range is neither GST-free nor input taxed.