Private ruling: GST and Foods
Published: April 2015

Ruling: Q1: Is the supply of your food GST-free? | A1: No, the supply of your food is taxable with the exception of a particular food item which remains GST-free. This ruling takes effect from: 1 st June 2015 Consequential Issues As a result of this ruling we have reviewed the private ruling authorisation number xxxxxx which was previously issued and advise that the private ruling will be withdrawn

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. • You are a trust and are registered for GST. • You trade under a trading name and your stores are located within the business district of certain cities. • You have previously obtained a Private Binding Ruling (PBR) from the Australian Taxation Office (ATO) in which the ATO ruled that the food products were GST-free. • The following facts have been taken from your previous PBR: • You sell a mix of takeaway foods. • The food is displayed in your food display cabinets. • The food require refrigeration for storage. • The food is packed in takeaway containers and not intended for consumption on your premises. • There is no hot food in the food items. • You have an, on-line order system similar to major fast food outlets. • You also offer your food in 'lunch bags'. • The food is marketed as express food, meaning your customers are served in a hurry, with minimal wait times. • The food is served in 3 sizes - small; regular and large.

Relevant legislative provisions: All references are to the A New Tax System (Goods and Services Tax) Act 1999 : Section 38-2 | Subsection 38-3(1) | Paragraph 38-3(1)(c) | Paragraph 38-4(1)(a) | Schedule 1

Reasons for decision: Summary: The supplies of your food with the exception of Food item B are food marketed as a prepared meal and therefore are a taxable supply and subject to GST. The Food item B is not a type of food that we consider is a prepared meal and is more akin to a side serving accompanying a meal and is therefore GST-free. | Detailed Reasoning - Detailed reasoning: A supply of food is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (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. The definition of food in section 38-4 of the GST Act includes food for human consumption, whether or not requiring processing or treatment. The Food will be sold in your food outlets as food for human consumption and consequently can be treated as food for human consumption. However, subsection 38-3(1)(b) and 38-3(1)(c) of the GST Act provide, amongst other things, that a supply of food is not GST-free if it is a supply of: • food of a kind specified in the third column of the table in clause 1 of Schedule 1 to the GST Act (Schedule 1), or food that is a combination of one or more foods at least one of which is food of a kind. | Detailed Reasoning - Schedule 1: In considering Schedule 1 for your food it is only necessary to consider Item 4 of Schedule1 which covers prepared meals. Your food items are not specifically named in Schedule 1. Nevertheless, these product may be subject to GST by virtue of paragraph 38-3(1)(c) of the GST Act which refers to food of a kind to those foods listed in Schedule 1. Item 4 excludes prepared meals and food marketed as prepared meals, but not including soup from GST-free status. When considering food under Item 4 we need to consider conditions outlined in clauses 2 and 3 of Schedule 1 of the GST Act. Clause 2 of Schedule 1 provides when considering prepared food under items 1 to 7, it does not matter whether the food is sold hot, cold or frozen or require cooking, heating, thawing or chilling prior to consumption. Clause 3 of Schedule 1 provides that Item 4 only applies to food that requires refrigeration or freezing for its storage. | Detailed Reasoning - Prepared Meals: The term 'prepared meal 'referred to in Item 4 is not defined in the GST Act and therefore takes its ordinary meaning. 'Meal' is defined in The Macquarie Concise Dictionary, 2001 , revised 3rd edition Macquarie Library Pty Ltd NSW (Macquarie Dictionary) as: 1. one of the regular repasts of the day, as breakfast, lunch, or dinner. 2. the food eaten or served for a repast. This definition could be applied to a single food item or to a meal consisting of several food items. The Macquarie Dictionary defines 'prepare' in relation to food as "to get ready for eating, as a meal, by due assembling, dressing or cooking" . The Further Supplementary Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998 (the EM) provides that the term 'prepared meal' is intended to cover a range of food products that: • directly compete against take-aways and restaurants • require refrigeration or freezing for storage and • are marketed as a 'prepared meal'. Included in this category (according to the EM at paragraph 1.33) are things such as: • prepared meals such as curry and rise dishes, mornay and similar dishes sold cold by a take-away or supermarket that only need reheating to be ready for consumption • fresh or frozen lasagne • sushi • cooked pasta dishes sold complete with sauce • frozen TV dinners and • fresh or frozen complete meals (for example single serves of a roast dinned including vegetables and low fat dietary meals). Paragraph 1.34 of the EM provides examples of food items that are not considered to be prepared meals: • frozen vegetables • uncooked pasta products • fish fingers • baby food, baked beans, spaghetti and Irish stew that do not require refrigeration or freezing. The Australian Taxation Office (ATO) view on prepared food is outlined in Goods and Services Tax Industry Issue - Food partnership Prepared Food (Prepared Food) (available from the ATO website www.ato.gov.au), a public ruling for the purposes of the Taxation Administration Act 1953 . P aragraph 12 of the Prepared Food ruling provides that consideration must be given to the suppliers' activities when deciding on whether a food is marketed as a prepared meal. The c onsiderations are: which states in part: All of the above meals, except for the sushi, are of a kind that are duly assembled, cooked or partly cooked and require heating and completion of the cooking process for them to be ready for consumption… Therefore, for food to be regarded as a 'prepared meal' in accordance with Item 4, the food needs to be supplied assembled and dressed (if applicable). In addition, if the food is cooked or partly cooked and is to be served hot, it should only need heating, which may include completion of the cooking process, to be ready for consumption. Heating will be interpreted to mean warmed in the microwave oven, convection oven, frying pan, wok or saucepan. In determining whether food is marketed as a 'prepared meal' the activities of the seller are relevant. Consideration is given to the following: • the name of the goods • the price of the goods • the labelling on any containers for the goods • literature or instructions packed with the goods • how the goods are packaged • how the goods are promoted or advertised and • how the goods are distributed. Consideration is also given to the actual product specifications, labelling, pricing, labelling and marketing as well as any cooking instructions. These are summarised as the "marketing test" . | Detailed Reasoning - The Marketing test: The issue to consider for the marketing test is whether your food items are marketed as a 'prepared meal'. Your website provides that you promote a "fresh fast food concept" and your range of food items are indicative of that found in similar 'ready to eat' food concept stores. Your menu page on your website shows pictures of your food in a bowl as a ready to eat product and not associated with any other food item indicating a side serve. The information available on your website indicates that your food items compete with traditional takeaway/fast food. You market your food items are as express food, meaning your customers are served in a hurry, with minimal wait times and you also offer your food in 'lunch bags' which would also indicate your food items being supplied as a prepared meal and not as a side dish. The food items require refrigeration for storage and are served from cold display cabinets. The information and the facts provided, including the website content, the packaging of your food items in one container and your store locations support your food items being marketed as prepared meals in their own right and not as a side dish. It is considered that your food items satisfy both clauses 2 and 3 of Schedule 1 as the food items are ready for consumption when supplied and they require refrigeration for storage. Your food items are assembled and are marketed as a prepared meal. Therefore, we consider that your food items are prepared meals listed in item 4 and are therefore excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. | Detailed Reasoning - Food item B: Traditionally a Food item B is served as an accompaniment or side dish to a meal. It is not considered to be a prepared meal on its own and would not normally be eaten as such. We consider that Food item B is not covered by Item 4. Furthermore, Food item B is not covered by any other item in Schedule 1, nor does it come within any of other exclusions listed in section 38-3 of the GST Act. Accordingly the supply of Food item B is GST-free. | Detailed Reasoning - Conclusion: Your Foods are supplied as a prepared meal under Item 4 and are a taxable supply under paragraph 38-3(1)(c) of the GST Act.