Edited version of private advice

Authorisation Number: 1051963347267

Date of advice: 25 March 2022

Ruling

Subject: GST classification of the food product

Question

Is a supply of the food Product a GST-free supply of food under 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 not GST-free under section 38-2 of the GST Act.

Relevant facts and circumstances

You are a producer of meat products such as ham, bacon and smallgoods. You are registered for GST.

You will sell the Product in retail supermarkets alongside refrigerated small goods.

The Product consists of a plastic tray with four equal sized compartments. Three of the compartments contain different types of meat (2 sliced and one bite size short sausage shape lengths) and one compartment contains cheese but into bite size blocks.

There is one plastic sheet that seals the entire package. Each individual compartment can be opened separately without opening other compartments as the seal is glued around each individual compartment.

The individual compartments can be separated from each other, however there is no perforation to make separation easier. Scissors can be used to separate the compartments.

The food is arranged in the packaging in a visually appealing way. The food items are not vacuum packed or tightly sealed but are instead cut up into smaller pieces and carefully placed into separate compartments to be aesthetically pleasing.

The product contains a variety of foods (meat and cheese) in a ready-to-eat form which can easily be uncovered and placed on the table serving. The Product requires no additional preparation.

There are three servings in each Product.

The Product is required to be refrigerated and consumed within 2 days of opening.

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 section 38-4.

A New Tax System (Goods and Services Tax) Act 1999 Schedule 1 clause 1 table item 5

Reasons for decision

Summary

Your supply of the Product is not GST-free supply of food under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as the Product falls within item 5 in the table in clause 1 of Schedule 1 to the GST Act (Item 5).

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 Product is food for human consumption and therefore satisfies the definition of food in paragraph 38-4(1)(a) of the GST Act.

However, paragraph 38-3(1)(c) of the GST Act provides that 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) or food that is a combination of one or more foods at least one of which is food of such 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 ...'

When determining the meaning of the phrase 'of a kind', the Courts have focussed on 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. Sundberg 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. Further, the Court held at para 109 that a supplier cannot, by a label (in that case, by describing the product on its packaging as 'Italian flat bread'), govern the classification of a product for the purposes of the GST Act.

In this regard, the case law Lansell House Pty Ltd & Anor v FC of T 2011 ATC 20-239 (Lansell 2011) at [30] 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.

We need to consider whether your product is food of a kind within item 5 of clause 1 in the table in Schedule 1 of the GST Act (Item 5).

Item 5 states:

"platters etc of cheese, cold cuts, fruit or vegetables and other arrangements of food"

The ATO view of item 5 is set out towards the end of issue 5 of the Food Industry Partnership - issues register which is available from the ATO website www.ato.gov.au.

Issue 5 states:

Clause 1, Item 5 of Schedule 1 of the GST Act operates to subject platters and other similar arrangements of food to GST. Therefore, fruit and cheese and cheese and cabanossi platters will be subject to GST.

Issue 5 also considers the definition of 'Platter' from the Macquarie dictionary being:

'1. a large shallow dish, commonly oval, for holding or serving meat etc.'

Issue 5 also states:

Item 5 of Schedule 1 is referring to platters and arrangements of food that can be uncovered and placed on the table ready for serving (for example, as a catering product at parties, BBQs and so forth).

Example 1

Sammy's Supermarket sells pumpkin that is chopped into pieces ready for roasting. There are four to six pieces of pumpkin on a plastic tray covered in plastic wrap. This product is not considered to be a platter.

Example 2

David's Gourmet Foods supplies trays of gourmet food to customers for use at parties and other functions. One of these trays consists of an arrangement of antipasto products including, meats, sundried tomatoes, pickled vegetables, bread sticks and other items chosen by the customer. This product is considered to be a platter and subject to GST.

However, each of these items can also be sold individually. For example, the sundried tomatoes are also sold in separate plastic containers with a lid. The supply of the products in this way is not considered to fall within Item 5 of the GST Act. However, it would need to be ascertained whether the products are then subject to GST under one of the other items in Schedule 1 of the GST Act.

Application of the ATO view to the Product:

We acknowledge that the tray provided with the food is not considered to fall within the ordinary meaning of the term platter. However, item 5 of Schedule 1 to the GST Act applies to 'platters etc' and 'other arrangements of food'.

We consider that key characteristics for item 5 to apply includes that the product:

•         is presented on a piece of serving ware i.e., something on which the prepared food can be served

•         is intended to achieve a desired visual effect

•         requires little or no additional preparation, and

•         is intended to be served as a whole to two or more people (for sharing).

We acknowledge that there are many factors that need to be taken into account in determining whether the product falls within item 5 of Schedule 1 to the GST Act, however when considered as a whole, we are of the view that the Product falls within

item 5 of Schedule 1 of the GST Act.

The factors we consider important in reaching this conclusion are:

•         The product is presented on a plastic tray with four equal compartments. The product is presented on a plastic tray which can be used to serve the food. The fact that the tray is disposable does not prevent it from being serving ware.

•         There is one plastic sheet sealing the entire package. This suggests that the entire tray is to be used at once for sharing with others.

•         The Product consists of an arrangement of food that can be uncovered and placed on the table ready for serving. This makes the Product of a kind to a caterer's platter and not a product containing food that needs to be arranged. While we recognise that the serving suggestion is that the product is to be combined with other foods such as olives, gherkins or crackers this does not prevent the product itself being an arrangement of food for the purposes of item 5.

•         The food is arranged in the packaging in a visually appealing way. The food items are not vacuum packed or tightly sealed but are instead cut up into smaller pieces and carefully placed into separate compartments to be aesthetically pleasing.

•         The product contains a variety of foods (meat and cheese) in a ready-to-eat form which can easily be uncovered and placed on the table serving. The Product requires no additional preparation.

•         The Product is intended to be served for two or more people. The marketing clearly indicates that the product is a share plate to be used for more than one person. The size of the product also demonstrates that it is more than a snack for one person.

As we consider the Product falls within Item 5, it is excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. Therefore, the supply of the Product is not GST-free under section 38-2 of the GST Act.