ATO ID 2002/119: GST and potato borekas
Date of decision: 7 November 2001
Business line: Indirect Tax

Issue
Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies potato borekas?

Decision
No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies potato borekas. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts
The entity is a food supplier. The entity supplies uncooked frozen potato borekas. The potato borekas are a roll shaped pastry product with a savoury potato filling. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.

Reasons for decision
Summary: A supply of food is GST-free under section 38-2 of the GST Act provided that it does not come within any of the exclusions listed in 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). Potato borekas are food for human consumption, and therefore, satisfy 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). Item 22 of Schedule 1 (Item 22) provides that 'pies (meat, vegetable or fruit), pasties and sausage rolls' are not GST-free. Therefore, it must be determined whether the potato borekas are a kind of pie, pastie or sausage roll. 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 king of hero. 4 ...' 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. The Macquarie Dictionary (1997) defines 'pie' as 'a baked dish consisting of a sweet (fruit, etc.) or savoury (meat, fish, etc.) filling, enclosed in or covered by pastry, or sometimes other toppings as mashed potatoes.' 'Pastie' is defined as 'a type of pie in which a circular piece of pastry is folded around a filling of vegetables, meat, etc and baked.' Potato borekas are a roll shaped pastry product with a savoury potato filling. According to The Macquarie Dictionary (1997) , pies and pasties can contain vegetarian fillings. Therefore, despite their shape, the potato borekas are a kind of pie or pastie because they consist of pastry folded around a savoury potato filling which is then baked. Thus, the supply of the potato borekas are not GST-free because the potato borekas are covered by Item 22. Clause 2 of Schedule 1 of the GST Act (Clause 2) operates to ensure that food listed at Item 22 is not GST-free regardless of whether it is supplied hot or cold, or require cooking, heating, thawing or chilling prior to consumption. Therefore, although the potato borekas are supplied raw and frozen, it is still food of a kind listed in Schedule 1. As such, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies potato borekas. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies of potato borekas.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 paragraph 38-3(1)(c) paragraph 38-4(1)(a) Division 40 Schedule 1 clause 1 Schedule 1 clause 1 table item 22 Schedule 1 Clause 2
Other references: The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales
Subject references: Goods & services tax GST free GST food Food for human consumption GST supplies & acquisitions Taxable supply