Edited version of private advice

Authorisation Number: 1052255754977

Date of advice: 30 May 2024

Ruling

Subject: GST - supply of product

Question

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

Answer

No.

This ruling applies for the following period:

ddmmyyyy to ddmmyyyy

Relevant facts and circumstances

You are registered for GST.

You intend to import the Products. There are several flavours that you are looking to import.

The Products require refrigeration for their storage.

You are looking to import different sizes of the Products and distribute the Products in the retail market.

You provided the name of the manufacturer and their website address, Product names, sizes, ingredient lists and percentage of each ingredient in the Products.

The Products mainly consist of cheese, sugar, cream and starch. These ingredients are mixed with additional ingredients, which depend on the flavour of each product, and baked.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

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, item 20

Reasons for decision

Question

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

Summary

The Products are XXXX and therefore food of a kind specified at item 20 in the third column of the table in clause 1 of Schedule 1 to the GST Act (item 20).

As theProducts are of a kind of food specified in Schedule 1 to the GST Act (Schedule 1), the supply of the Products is excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

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

Detailed reasoning

Section 9-40 of the GST Act provides that 'you must pay the GST payable on any taxable supply that you make'.

Section 9-5 of the GST Act provides that you make a taxable supply if:

(a)          you make the supply for consideration

(b)          the supply is made in the course or furtherance of an enterprise that you carry on

(c)          the supply is connected with Australia, and

(d)          you are registered or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

The sale of the Products meets the requirements of section 9-5(a) to 9-5(d) of the GST Act. Further the sale of the Products is not an input taxed supply. Therefore, what is left to determine is whether the supply of the Products is GST-free.

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 of the product 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 (paragraph 38-4(1)(a) of the GST Act).

The Products are food for human consumption, and therefore, satisfy the definition of food in paragraph 38-4(1)(a) 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 specified in Schedule 1, or food that is a combination of one or more foods at least one of which is food of such a kind.

In this case item 20 under the category heading 'bakery products' is relevant for consideration. Item 20 specifies 'cakes, slices, cheesecakes, pancakes, waffles, crepes, muffins and puddings'.

The term 'cake' and xxxx are not defined in the GST Act therefore they take their ordinary meaning.

The Macquarie Dictionary online, www.macquariedictionary.com.au,accessed 24 May 2024, defines cake as:

noun 1. a sweet baked food in loaf or layer form, made with or without shortening, usually with flour, sugar, eggs, flavouring, and a liquid.

and XXXX as:

noun 1. a kind of cake or open pie filled with a rich, sweet mixture containing a soft cheese, such as cream cheese, and other flavourings.

Further, the Detailed food list (DFL), which is a public ruling for the purpose of section 105-60 of the Taxation Administration Act 1953, provides the ATO view of the GST classification status of major food and beverage product lines. The DFL relevantly includes the following entry:

Table 1:GST classifications

It should be noted that clause 2 of Schedule 1 states that in relation to food covered by any of the items in the table relating to the category of bakery products, it does not matter whether the product is supplied hot or cold, or requires cooking, heating, thawing or chilling prior to consumption.

The Products consist of cheese as well as sugar, cream and modified food starch. These ingredients are mixed with additional ingredients, depending on the flavour of each Product, and baked.

We consider that the Products come within the genus, class or description of XXXX and therefore are covered by item 20. As such, paragraph 38-3(1)(c) of the GST Act excludes the Products from being GST-free under section 38-2 of the GST Act.

Additionally, the supply of the Products is not otherwise GST-free under any other provision of the GST Act or a provision of another Act. The supply of the Products is a taxable supply as it meets all the requirements of section 9-5 of the GST Act.

You stated that the Products are dairy desserts.

Dairy based desserts will not be GST-free if they are of a kind of food listed in Schedule 1.