Edited version of private advice

Authorisation Number: 1051737803223

Date of advice: 17 August 2020

Ruling

Subject: GST and food classification

Question

Is the supply of seafood pastry ('Product') GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, the supply of the Product is GST-free under section 38-2 of the GST Act.

Relevant facts and circumstances

You are an Australian entity which is registered for GST.

You sell seafood pastry ('the Product') in Australia.

You will sell the Product in the frozen seafood chiller section of the stores alongside other seasonal seafood specialty products.

The Products are packaged in clear plastic with a number of pieces.

The Products require refrigeration and are sold frozen with a recommendation to be stored below a certain temperature.

The Product consists of raw seafood and cream cheese filling wrapped in a thin layer of puff pastry which is shaped as a parcel and then frozen.

The Product is promoted and advertised as uncooked frozen products that needs to be cooked before consumption.

The cooking instructions require the customers to preheat the oven and baking plate to 220°C (200°C fan assisted), line the plate with baking paper and subsequently place the product at issue on the plate for approximately 12-15 minutes to bake. The customers need to ensure that the Product is piping hot in the centre and fully cooked before consumption. The Product cannot be eaten without cooking at any stage once purchased by the customers from your store.

You provided pictures and ingredients of the Products.

The ingredients of the Product are puff pastry, acidity regulator, cream cheese, water, chives, egg yolk powder, modified maize starch, dill, rapeseed oil, salt, mustard seeds, vinegar, white paper and lemon juice concentrate,

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 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 Schedule 1 clause 1 item 25.

Summary

The supply of the seafood pastry is GST-free under section 38-2 of the GST Act.

Detailed reasoning

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 paragraph 38-4(1)(a) of the GST Act to include 'food for human consumption (whether or not requiring processing or treatment)'. The Products are 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 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 law Lansell 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...

In coming to its decision, Lansell also considered, among other things, the product's

·         use

·         in store display

·         marketing

·         tax treatment in the country of manufacture, and

·         appearance.

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.

Bakery products

The following items included in Schedule 1 in relation to pastry products are of relevance to this case:

Item 22 - pies (meat, vegetable or fruit), pasties and sausage rolls

Item 23 - tarts and pastries

Item 25 - pastizzi, calzoni and brioche

Clause 2 of Schedule 1 provides that, for the purpose of determining whether particular food is covered by any of the items in the table in Schedule 1 relating to the category of Bakery Products (which includes Items 22, 23 and 25), it does not matter whether the food is supplied hot or cold, or requires cooking, heating or thawing or chilling prior to consumption.

The ATO view on pastry products is provided in Issue 30 of the Food Industry Partnership - Issues Register (Issue 30).

Issue 30 provides that in order for products to be of a kind to the food products listed in items 22, 23 and 25, the products would need to be baked before consumption. Consequently, those products that are fried, steamed or boiled cannot be considered to be of the same kind.

The Macquarie Concise Dictionary 3rd Edition (the Macquarie Dictionary) defines 'pastry' to be:

1. food made of paste or dough, as the crust of pies, etc. 2. articles of food of which such paste forms an essential part, as pies, tarts, etc."

Item 22:

Item 22 refers to pies (meat, vegetable or fruit), pasties and sausage rolls.

The Macquarie Dictionary defines the above items as follows:

Pie - 'a baked dish consisting of a sweet (fruit, etc) or savoury (meat, fish, etc) filling, enclosed in or covered by pastry, or sometimes other topping as mashed potatoes';

Pastie - 'a type of pie in which a circular piece of pastry is folded around a filling of vegetables, meat etc., and baked';

Sausage roll - 'a roll of baked pastry filled with sausage meat'.

Based on the information provided, the seafood pastry contains cold smoked seafood wrapped in a thin layer of raw puff pastry. The cold seafood is considered as not cooked. Therefore, the seafood pastry does not have the same nature, quality and adaptation as 'pies (meat, vegetable or fruit) pastries and sausage rolls' and hence is not food of a kind referred to in Item 22.

Item 23:

Item 23 refers to tarts and pastries. The Macquarie Dictionary defines 'tart' as:

A small and saucer shaped shell of pastry filled with cooked fruit or other sweetened preparation and having no top crust

A similar but larger pastry concoction

As the seafood pasty is not sweet it is not food of a kind referred to in Item 23 (tarts and pastries).

Item 25

Item 25 refers to pastizzi, calzoni and brioche.

'Pastizzi' is not defined in the Macquarie Dictionary but the general meaning of that term provided by culinary reference books is as follows:

A traditional Maltese pastry. It is boat shaped and contains a variety of fillings. It is made from puff pastry and traditionally was filled with ricotta cheese. However, they may also contain various other fillings and are baked.

ATO Interpretative Decision ATO ID 2002/118 refers to uncooked frozen filo pastries with savoury vegetarian fillings which may contain either spinach, mushroom or sprout fillings and come in round, triangular and log shapes. It provides that even though the filo pastries with vegetarian savoury fillings are raw and frozen they are considered to be food that is of a kind of pastizzi.

This indicates that for the purposes of item 25, the shape of the food item (i.e. whether boat shaped, a triangle, or a parcel) and the type of pastry used are not considered determinative of the nature or quality of food that is of a kind of pastizzi.

The seafood pastry is shaped as a parcel. However, the filling is cold smoked seafood and cream cheese which is not of the same nature and quality as that generally associated with pastizzi (which are traditionally filled ricotta cheese or a mushy split pea mixture which is sometimes slightly spicy but may contain various other fillings).

Hence, the seafood pastry is not 'of a kind' of a pastizzi referred to in Item 25.

Calzoni is described in recipe books as a folded Italian pizza which, by the sheer nature of its shape, is far more portable than a normal pizza and looks a bit like a Cornish pasty.

Given that the seafood pastry is made with puff pastry rather than pizza dough it lacks the nature and quality of calzoni.

Hence, we consider that the seafood pastry is not food of a kind referred to in Item 25.

The seafood pastry is not food of a kind specified in Schedule 1. In addition, the seafood pastry does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the supply of the seafood pastry by you is GST-free under section 38-2 of the GST Act.