Edited version of private advice

Authorisation Number: 1051906737683

Date of advice: 08 October 2021

Ruling

Subject: GST and food classification

Question

Is the supply a specified product (the Product) 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 the Product is a taxable supply under section 9-5 of the GST Act and therefore subject to GST.

Relevant facts and circumstances

You are registered for GST.

You will sell the Product as a specialty product.

The Product will be sold in an aluminium foil tray.

The Product will be required to be stored in a frozen state and will be sold frozen.

The Product will be sold in the refrigerated section of your store alongside other specified frozen food products that may be GST-free.

You have provided details of the ingredients of the Product.

The Product consists of a filling that is covered by a specified food on the top. The Product does not contain a pastry outer layer.

You provided images of the Product. The Product has the appearance of a pie and resembles a shepherd's pie.

The Product contains raw and par-cooked meat. The Product cannot be eaten without cooking at any stage once purchased from your store. The Product will be promoted and advertised as an uncooked frozen Product that needs to be thoroughly cooked before consumption.

The cooking instructions will provide that the Product should be defrosted before cooking. The cooking instructions will require the consumer to pre-heat the oven and subsequently place the aluminium foil tray on the cooking rack for a specified period of time to cook. The consumer needs to make sure that the Product is fully cooked before consumption.

The Product is intended as a shared Product.

The Product will be marketed as an accompaniment to a meal. The Product's packaging will contain a suggestion that the Product be consumed with salad or vegetables.

There will be no cutlery (fork/spoon/knife), condiment (sauce) or serviettes provided with the packaging.

You provided detailes of the manufacturing process of the Product. The ingredients for the filling such as meat and other specified ingredients are prepared and combined, the filling is deposited into a tray and topped with a specified food ready to be backed.

The name of the Product includes the words 'meat pie'.

The Product meets the technical definition of a pie as it satisfies the requirements of Food Standards Australia New Zealand (FSANZ) which stipulates that a meat pie must contain at least 25% of meat flesh.

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

Reasons for Decision

Summary

The supply of the Product is not GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as the Product is excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. The Product falls under item 22 in the table in clause 1 of Schedule 1 to the GST Act (item 22).

The supply of the Product therefore is a taxable supply under section 9-5 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 the supply is not excluded from being GST-free 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)' (paragraph 38-4(1)(a) of the GST Act).

In the present case, it is accepted that the Product is 'food for human consumption' under section 38-4 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' that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1).

Accordingly, the Product will be GST-free unless it is food 'of a kind' specified in Schedule 1.

Meaning of 'of a kind'

The phrase 'of a kind' is not defined in the GST Act, but was considered by Sundberg J in Lansell House Pty Ltd v Federal Commissioner of Taxation [2010] FCA 329 (Lansell 2010).

His Honour was required to determine whether a product known as mini ciabatte was 'of a kind' of cracker, and therefore not GST-free. The product was described on its packaging as 'Italian flat bread'.

Sundberg J reviewed the relevant authorities, including Air International Pty Ltd v Chief Executive Officer of Customs (2002) 121 FCR 149 ('Air International'), and, at [19], agreed with the comments of Tamberlin J in that case, that the words 'of a kind' added something to the words 'specified':

If the intention had been simply to exclude the items in the table in the schedule, Parliament would have used the words "food specified in the third column". What then does "of a kind" add? In Air International the Full Court was concerned with a classification of goods under tariff subheadings in Schedule 3 of the Customs Tariff Act 1995 (Cth) - goods "of a kind used as replacement components in passenger motor vehicles". Tamberlin J, with whom O'Loughlin J agreed, said at [53]:

"It is helpful to look at actual use, if any, when deciding whether goods are of a kind used as replacement components. Where they are so used, then that points to a conclusion that they are 'of a kind' so used. The words 'of a kind' add a further level of generality to the expression 'used' so that even if (to use the Tribunal's expression) the goods are not so used but are within a range of goods of a type which are used, then they satisfy the required description.

...

The description can apply where there is no actual use of a good as a replacement component if the goods are of that genus. That is to say they are of the same type of component which is used to replace components of passenger motor vehicles. The genus, in my view, is a relatively broad one and the word "kind" should be so construed." [Emphasis added.]

His Honour also noted at [20] that the same approach was taken in Customs and Excise Commissioners v Mechanical Services (Trailer Engineers) Ltd [1979] 1 WLR 305, a value added tax case. The question was whether the particular goods fell to be classified as 'Goods of a kind suitable for use as parts of goods within item 1 or item 5'. His Honour referred to the passage quoted by Megaw LJ at [316], which was quoted with approval in Air International at [28]:

Presumably the three words 'of a kind' have not been introduced merely for elegance of prosody or to provide meaningless padding. They do affect the meaning. It is not 'the goods' - the particular articles, here the couplings and the winch - which have to be suitable for use as parts. It is the kind of goods to which those particular articles belong, their genus, which has to be thus suitable. The addition of 'of a kind' would be meaningless if goods which are themselves suitable are necessarily also goods of a kind which is suitable.

Ultimately, Sundberg J found that the mini ciabatte was a 'cracker', and thus was not GST-free. His Honour did not need to rely on the product falling within the broader description of 'of a kind'.

The taxpayer's appeal to the Full Federal Court was dismissed in Lansell House Pty Ltd v Federal Commissioner of Taxation [2011] FCAFC 6 (Lansell 2011). The Full Federal Court held at [30] that:

The word "kind" is appropriately used to denote a genus, class or description (Commonwealth of Australia v Spaul (1987) 74 ALR 513 at 516 per Davies, Lockhart and Neaves JJ). 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... The question is whether the resulting product comes within the genus, class or description of a cracker.

The Full Federal Court was satisfied that the mini ciabatte was 'of a kind' of the cracker genus, after taking into account the characteristics of the product as set out by Sundberg J at [109], which included the following factors in relation to the goods:

(a)     ingredients

(b)     manufacturing process

(c)     origin of the product

(d)     in store display

(e)     marketing

(f)      appearance and physical attributes.

Accordingly, a product will be 'of a kind' if it is of the same nature or character (possessing the same distinguishing qualities) as the class or genus in question.

Approach to interpreting meaning of items listed in Schedule 1

The items listed in Schedule 1 are not defined in the GST Act.

The Federal Court (French, Hill and Whitlam JJ) in Diethelm Manufacturing Pty Ltd v Federal Commissioner of Taxation (1993) 44 FCR 450, provided a guide for interpreting words in a revenue statute where they are not otherwise defined in legislation. The case concerned the classification of chairs for the purpose of Item 1(a) of the Third Schedule to the Sales Tax (Exemptions and Classifications) act 1935 (Cth). French J, at p. 457, made these observations:

The construction of a revenue statute requires at the outset a consideration of whether or not its words are used in their natural and ordinary meaning, or in some commercial sense, or perhaps, between those poles, some extension or limitation of the ordinary or commercial meaning. Revenue laws directed to commerce frequently employ the descriptions and adopt the meanings in use among those in the relevant trade: Herbert Adams Pty Ltd v Commissioner of Taxation (Cth) (1932) 47 CLR 222 at 227 (Dixon J). On the other hand, the inclination to adopt commercial construction must not be taken to exclude the possibility that the words of a relevant statute may bear their ordinary and natural meaning: D&R Henderson (Mfg) Pty Ltd v Forbes (Collector of Customs (NSW)) (1974) 48 ALJR 132 and see generally Collector of Customs v Bell Basic Industries Ltd (1988) 20 FCR 146 at 156-158.

Conti J made similar observations in Saga Holidays Ltd v Commissioner of Taxation [2005] FCA 1892, in the context of the GST Act. His Honour explained that revenue provisions often employ technical language because the provisions are intended to be understood by people in the industry:

A contextual consideration involved in construing the GST Act is that GST is traditionally a tax on 'businessmen', to be assessed and paid by businessmen, and to be administered and interpreted in accordance with the understanding of businessmen. This is in contrast to other forms of taxation, such as income tax, which is ordinarily assessed by the Commissioner.

In Lansell 2010 Sundburg J noted at [50]:

...There is in truth no particular trade to which the goods and services legislation is directed. It is not directed specifically to bakers or to vendors of baked food products. It is directed to all suppliers in the supply chain, and includes the manufacturer, importer, wholesaler and retailer. This underlines the high improbability of there being one settled specialised meaning of the various food types. It argues strongly in favour of the words being accorded their ordinary meaning as understood by a reasonable objective observer who has no detailed knowledge of the intricacies of the manufacture of the particular products.

Item 22

We consider that of most relevance to the Product is item 22 in the category of 'bakery products', which provides that 'pies (meat, vegetable or fruit), pasties and sausage rolls' are not GST-free.

Meaning of 'pie' or 'of a kind of pie'

The word 'pie' is not defined in the GST Act therefore it takes its ordinary meaning.

To ascertain the ordinary English meaning of the word 'pie' regard is had to the dictionary meaning of the word.

Macmillan Publishers Australia, The Macquarie Dictionary Online, www.macquariedictionary.com.au,accessed 5 October 2021, defines 'pie', relevantly, as follows:

noun 1. 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.

2. US → tart².

The Australian Oxford Dictionary, 2004, 2nd edn, Oxford University Press, Melbourne, defines 'pie', relevantly, as follows:

noun

1. a baked dish of meat, fish, fruit, etc., usu. with a top and base of pastry.

2. anything resembling a pie in form: a mud pie.

These definitions support a wide interpretation of the word 'pie' as a baked dish consisting either of sweet or savoury filling (e.g., fruit, meat, etc), which may be enclosed in or covered by pastry, but need not always have a top and base of pastry, may have another topping, such as mashed potatoes and there is no reference to a pie being a particular shape.

The ordinary meaning of pie does not indicate that the filling has to be cooked before it is placed in a pastry casing or a baking dish.

It should be noted that clause 2 of Schedule 1 provides that for the purpose of determining whether a product is covered by an item in Schedule 1 relating to the category of 'bakery products', it does not matter whether it is supplied hot or cold, or requires cooking, thawing or chilling prior to consumption.

Further the ordinary meaning of pie does not require a pie to contain specific ingredients or to be served/supplied with other food such as vegetables.

We consider that the Product has sufficient qualities to be considered a 'pie'. The Product is called a 'meat pie'. The Product has similar ingredients to pies. The Product has a savory filling that is covered with a specified food on the top, resembling a shepherd's pie. The manufacturing process of the Product is similar to the manufacturing process of pies. That is the ingredients for the filling such as meat and other specified ingredients are prepared and combined, the filling is deposited into a tray and topped with a specified food ready to be backed. The Product is required to be baked before consumption. The Product has the appearance of a pie and resembles a shepherd's pie.

The placement of the Product in the store next to GST-free products is not a determinative factor in this case. Additionally, whilst not a relevant factor to whether a product is a pie or of a kind of a pie for GST purposes, the Product meets the technical definition of a 'meat pie' as it satisfies the FSANZ standards.

Based on the above, we consider that the Product has sufficient characteristics to be considered a 'pie' and therefore is covered by item 22. Accordingly, the supply of the Product is not GST-free under section 38-2 of the GST Act as the Product is excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

The supply of the Product therefore is a taxable supply under section 9-5 of the GST Act.