Edited version of private advice

Authorisation Number: 1052328261347

Date of advice: 05 December 2024

Ruling

Subject: GST and food marketed as a prepared meal

Question 1

Is the supply of the specified product (Product) a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999?

Answer 1

Yes.

This ruling applies for the following period:

From 1 July 20XX to 30 June 20XX

Relevant facts and circumstances

You are registered for GST.

You supply the Product to food retailers in Australia.

You provided pictures of the Product's packaging, which includes the name of the Product and other details such as content of the packaging, ingredients, nutrition information and cooking directions.

The Product consist of a number of food components.

You provided a chart outlining the manufacturing process of each component of the Product. The manufacturing chart shows that each component is separately prepared and cooked. That is, the ingredients of each item are weighed, mixed, seasoned, flavoured and cooked and packaged individually.

The Product of a sufficient quantity, mix and seasoning.

The Product serves a specified number of people.

The name of the product suggests that the Product is a prepared meal.

The Product is of a kind of food that is marketed as a prepared meal.

The cooking instructions provide that the consumer is to combine the components, add some water and cook for a specified time.

The Product requires refrigeration for its storage.

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

Reasons for decision

Summary

The Product is food of a kind that is marketed as a prepared meal and therefore covered by item 4 in the table in clause 1 of Schedule 1 to the GST Act (item 4). As such, the sale of the Product is excluded from being GST-free by the operation of paragraph 38-3(1)(c) of the GST Act.

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

Detailed reasoning

Relevant Legislation

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

(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 for GST.

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

The supply of the Product meets the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. Additionally, the supply of the Product is not input taxed. Therefore, what is left to determine is whether the supply of the Product 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 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 further processing or treatment)' (paragraph 38-4(1)(a) of the GST Act).

The Product meets 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 that is specified in the third column of the table in clause 1 of Schedule 1 to the GST Act (Schedule 1).

Relevant to paragraph 38-3(1)(c) of the GST Act and the Product, is the category of 'Prepared food' in Schedule 1 and more specifically, item 4 which specifies:

food marketed as a prepared meal, but not including soup

Relevant to the category of 'prepared food' and item 4, are clauses 2 and 3 of Schedule 1 which state:

2 Prepared food, bakery products and biscuit goods

For the purpose of determining whether particular *food is covered by any of the items in the table relating to the category of prepared food, bakery products or biscuit goods, it does not matter whether it is supplied hot or cold, or requires cooking, heating, thawing or chilling prior to consumption.

3 Prepared meals

Item 4 in the table only applies to *food that requires refrigeration or freezing for its storage.

The approach to food classification issues established by the case law

In the previous food classification cases including Lansell House Pty Ltd v Commissioner of Taxation [2010] FCA 329, and Lansell House Pty Ltd v Commissioner of Taxation [2011] FCAFC 6 (Lansell House 2011), the Courts have held that classification decisions for GST purposes are questions of fact and degree, a matter of impression and a combination of fact-finding and evaluative judgment. The question to be answered is whether the product at issue comes within the genus, class or description of a product specified in Schedule 1.

Simplot Australia Pty Limited v Commissioner of Taxation [2023] FCA 1115 (Simplot) is a recent case in which the Federal Court considered the GST classification of a range of frozen food products supplied by Simplot Australia Pty Limited. The products each contained a mix of vegetables along with spices or seasonings (some included grains).

Consistent with previous food classification decisions, on the meaning of the words 'food of a kind' in paragraph 38-3(1)(c) of the GST Act, in Simplot the Court said that effect needs to be given to all the words. The Court agreed with the findings in Cascade Brewery v Commissioner of Taxation [2006] FCA 821 (Cascade) that the words 'of a kind' are words of expansion rather than limitation, and the finding in Lansell House 2011, that the use of the words 'of a kind' in paragraph 38-3(1)(c) of the GST Act adds further generality to the description of the items specified in Schedule 1. In Simplot the Court also noted that a food does not need to be specified in Schedule 1, it is sufficient if the food is 'of a kind specified'. That is, the question is whether the product in question is a member of class or category of food that is marketed as a prepared meal.

In Simplot at [105 - 110], the Court considered the meaning of the words 'marketed as' in the context of item 4. Referring to Cascade, it noted that when considering if a product is of a kind marketed as a prepared meal the question is not just how the product itself is marketed but whether the product is 'of a kind' that is marketed as a prepared meal by other sellers.

The meaning of 'prepared meal' was considered in Simplot at [111-126]. The Court noted that the phrase 'prepared meal' is to be given its ordinary meaning.

At [124], the Court in Simplot stated that the attributes of a 'prepared meal' are to be discerned from common experience. Those attributes include:

(a) quantity - a meal connotes a quantity of substance, even if it may be termed a small meal;

(b) composition - a prepared meal connotes food consisting of more than one ingredient or element. Whether a combination of foods constitutes a meal is a question of fact and degree. A dish comprised solely of vegetables can be a meal. However a serving of a mix of vegetables (e.g. peas and corn) may not be a meal;

(c) presentation - a prepared meal connotes a combination of foods that is complete. Matters such as seasoning, sauces and flavourings may all be relevant in determining whether foods are of a kind marketed as a prepared meal.

At [125] in Simplot, the Court concluded that:

Foods of a kind marketed as a prepared meal therefore refers to foods of a sufficient quantity, mix and seasonings as to be regarded by the ordinary person as being of a kind that are marketed as a prepared meal.

Additionally, in Simplot at [126], the Court noted that the form of packaging is not determinative of the issue of whether a food is of a kind marketed as prepared meal. The Court did not accept the taxpayer's contention that foods that are not packaged in containers from which they could be consumed were not 'prepared meals'. It further stated that foods packaged in a form to serve more than one individual do not cease to be foods of a kind marketed as a prepared meal.

GST classification of the Product

The name of the Product suggests that it is a prepared meal. The Product consist of a number of food components.

The Product serves a specified number of people.

The food components are not raw. Each component is separately prepared and cooked. That is, the ingredients of each item are weighed, mixed, seasoned, flavoured and cooked before being packaged individually.

As the Court noted in Simplot,the form of packaging does not determine whether a food is of a kind marketed as a prepared meal. Additionally, the Court said that foods packaged in a form to serve more than one person do not cease to be foods of a kind marketed as a prepared meal merely because the foods are intended to be divided into the consumer's desired serving portions.

As a matter of common experience, a combination of the components is food of a kind that is marketed as a prepared meal.

All the components of the Product are cooked, seasoned and ready to be combined. The Product is presented as a complete meal that is of a sufficient quantity, mix and seasoning. The Product requires limited further preparation or assembly by the consumer before consumption. All that the consumer needs to combine the components, add some water and cook for the specified time. We consider these to be minimal activities. The Product does not cease to be of a kind of a prepared meal merely because the consumer has to combine and heat the ingredients before consumption. Individually packaging of each component increases its shelf life and allows the consumer to mix the components only when required.

The fact that the Product needs further cooking or heating by the consumer before it can be eaten does not preclude the Product from being covered by item 4 (clause 2 of Schedule 1).

Further, the Product meets the test in clause 3 of Schedule 1 as it requires refrigeration for its storage.

Taking the characteristics of the Product into account, we consider that the Product is of a kind regarded by the ordinary person as being food marketed as a prepared meal. Accordingly, the Product falls within the genus or category of food of a kind that is marketed as a prepared meal under item 4. The supply of the Product is excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. It follows that the supply of the Product is not GST-free under section 38-2 of the GST Act.

The supply of the Product is a taxable supply as it meets all the requirements of section 9-5 of the GST Act.