Edited version of private advice

Authorisation Number: 1052308056608

Date of advice: 23 September 2024

Ruling

Subject: GST - food classification

Question 1

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)?

Answer

No.

Relevant facts and circumstances

The entity is registered for GST.

The entity is importing the Products into Australia.

The Products' ingredients consist mainly of flour, starch and sugar.

The Products are sweet.

The Products are steamed.

The Products are supplied frozen.

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 decisions

Question 1

Is the supply of the Products GST-free under section 38-2 of the GST Act?

Summary

The supply of the Products is not GST-free under section 38-2 of the GST Act as the Products are excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. The Products fall under item 20 in the table in clause 1 of Schedule 1 to the GST Act. It is considered that the Products are a kind of pudding'.

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). In the present case, it is accepted that the Products are '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 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.

Item 20 in Schedule 1 lists various products under the heading 'Bakery products', such as 'cakes, slices, cheesecakes, pancakes, waffles, crepes, muffins and puddings'. Of most relevance to the Products in this case is 'puddings'.

The ATO view on what is pudding is outlined in Issue 13 of the Food Industry Partnership- Issues register. The ATO view states:

What is the definition of a 'pudding' for the purposes of item 20 in Schedule 1?

Clause 1, Item 20 of Schedule 1 of the GST Act operates to subject the following products to GST:

'cakes, slices, cheesecakes, pancakes, waffles, crepes, muffins and puddings'

These terms are not defined in the GST Act and are therefore afforded their ordinary meaning. Therefore, the word 'pudding' is defined to mean:

'a cooked food that is a sweet or savoury dish made in many forms and of various ingredients, as flour (or rice, tapioca, or the like), milk and eggs, with or without fruit, meat or other ingredients and is a cooked dish consisting of various sweet or savoury ingredients, especially as enclosed within a flour-based crust or mixed with flour, eggs, etc., and boiled or steamed; a baked batter mixture'.

Therefore, the ATO is of the view that 'puddings' for the purposes of item 20 in Schedule 1 of the GST Act only include those products that satisfy the above meaning.

Below are examples of products that are considered to be a pudding and are not GST-free:

•                     rice pudding

•                     tapioca pudding

•                     self-saucing puddings

•                     steamed puddings.

•                     Christmas pudding

The above suggests that the term 'pudding' encompasses a range of sweet dishes made with various ingredients that are cooked, boiled, steamed, or baked. Sweet puddings are most often made with flour, milk and/or eggs, with or without fruit or other ingredients.

You submittedthat theProducts are not bakery products and are steamed, not baked. The Products are not similar to cakes, slices, cheesecakes, pancakes, waffles, crepes, muffins or puddings and do not have sweet filling or coating. As such, you consider that item 20 of the Schedule 1 of the GST Act does not apply.

We do not agree with your view that item 20 of the Schedule 1 of the GST Act does not apply.

Although puddings are incorporated under the category 'Bakery products', the category headings are not operative, as per Note 2 in Schedule 1 of section 182-15 of the GST Act. However, the category 'Bakery products' can be considered in accordance with subsection 182-10(2) to assist:

(a) in determining the purpose or object underlying the provision; or

(b) to confirm that the provision's meaning is the ordinary meaning conveyed by its text, taking into account its context in the Act and the purpose or object underlying the provision; or

(c) in determining the provision's meaning if the provision is ambiguous or obscure; ...'

The Products display characteristics of a pudding, specifically:

•                     Puddings are either cooked, boiled, steamed, or baked. The Products are made by mixing all the ingredients and put into moulds to rest and then steamed.

•                     The Products ingredients include mostly flour, starch and sugar which are common ingredients of puddings.

•                     The Products have a sweet character similar to sweet puddings.

•                     While the Products have a fluffy texture and shaped differently, their appearance is similar to other types of puddings.

Based on the information provided, the Products have sufficient qualities to be considered a kind of puddings covered under item 20. As such, the Products are excluded by paragraph 38-3(1)(c) of the GST Act from being GST-free under section 38-2. Accordingly. the supply of the Products is a taxable supply if all the requirements of section 9-5 of the GST Act are satisfied.

The supply of the Products therefore is a taxable supply and subject to GST.

Section 9-5 of the GST Act states:

You make a taxable supply if:

(a)           you make the supply for *consideration; and

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

(c)           the supply is *connected with the indirect tax zone; 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.

(* denotes a term defined in section 195-1 of the GST Act).