ATO ID 2004/709: GST and oriental buns with sweet filling
Date of decision: 13 June 2002
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 oriental buns with a sweet filling?

Decision
No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies oriental buns with a sweet filling as buns with a sweet filling are specifically excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act 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 oriental buns with a sweet filling. The ingredients of the buns are flour, water, sugar, and yeast. The ingredients of the filling are beans, sugar and oil. The product is not sold hot and is not for consumption on the premises from which it is supplied. The entity is registered for goods and services tax (GST) and the supply of the oriental buns with sweet filling 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 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 processing or treatment)(paragraph 38-4(1)(a) of the GST Act). As they are food for human consumption, oriental buns with a sweet filling 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 the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 27 in Schedule 1 (Item 27) specifies 'bread (including buns) with a sweet filling or coating'. The filling in the oriental buns is a sweet mixture of beans, sugar and oil. As the oriental buns have a sweet filling they are food of a kind specified at Item 27 and are excluded from being a GST-free supply by paragraph 38-3(1)(c) of the GST Act. Therefore, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies oriental buns with sweet filling. 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 of oriental buns with sweet filling is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the supply of oriental buns with sweet filling is a taxable supply under section 9-5 of the GST Act.

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) section 38-4 paragraph Division 40 Schedule 1 clause 1 Schedule 1 clause 1 table item 27
Subject references: Goods and services tax GST food Bakery products Food for human consumption Taxable supply