Private ruling: GST and food
Date of advice: 27 November 2017
Published: January 2018

Ruling: Q1: Is GST payable on your supply of your food products? | A1: GST is payable on the supply of some of your food products.

Relevant facts and circumstances: ● You are registered for GST. ● You operate an enterprise of supplying food products within a food court. ● All your food products are refrigerated before sale. ● You do not provide table service and there is no differentiation made by you between food that is consumed in or away from the food court. ● All your products could be consumed in or away from the food court however, you have no way of determining where the food product will be consumed. ● You sell cold salads in take-away containers. Some salads are pre-packaged. ● A portion of meat (hot or cold) can be purchased with a salad. ● Some products have meat in the salad. ● A customer can make their own salad from a salad bar. What they select is sold in take-away containers. They can also select a portion of cold shredded meat from the salad bar. ● You sell other products in take-away containers that can be sold hot or cold. These products, apart from one, have meat as a component. ● You sell unopened natural bottled water and fruit juice in their original containers. The fruit juice is at least 90% by volume of juices of fruits. ● None of your products are marketed as prepared meals.

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 Section 38-4.

Reasons for decision: Summary: 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. Your products are sold in a retail outlet as food for human consumption and consequently, can be treated as food for human consumption. | Detailed Reasoning - When the supply of food is taxable: You operate your enterprise within a food court. Paragraph 38-3(1)(a) of the GST Act will exclude a supply of food from being GST-free if the food is consumed on the premises from where it is supplied. The ATO view on what constitutes premises is give by goods and service tax determination GSTD 2000/4 (available from the ATO website www.ato.gov.au). This determination includes food courts as premises from where food can be supplied. Another exclusion is provided by paragraph 38-3(1)(b) of the GST Act. This provision excludes the supply of food from being GST-free if it is served hot and consumed away from the premises where it is supplied. Note that any food served hot will be captured by one of the above two legislative paragraphs and hence will always be taxable. The third and final exclusion that is of relevance to your sale of the food products is paragraph 38-3(1)(c) of the GST Act. This provision provides that a supply of food is not GST-free if it is food of a kind that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1) or is a food that is a combination of one or more foods at least one of which is food of such a kind. Schedule 1 includes the following food item that may be of relevance when considering the GST treatment of your food products: ● food marketed as a prepared meal (Item 4 of Schedule 1). It is therefore necessary to determine if your products are captured by any of these exclusions. | Detailed Reasoning - When is food consumed on the premises: In the situation where it is difficult to determine where food will be consumed, we can refer to goods and services tax determination GSTD 2000/5 (also available from the ATO website) which provides the ATO view on where consumption takes place. Paragraph 4 of GSTD 2000/5 states the following: If your business operations do not identify takeaway supplies from dine-in supplies, food will remain GST-free if: ● it is served in its original or takeaway form (for example, an unprocessed apple or unopened bottle of water); and ● it is not served in circumstances indicating that consumption will take place on the premises (for example, the food is not served at a table). | Detailed Reasoning - What is a prepared meal: The ATO view on prepared meals is provided by Issue 5 of the Food Issues Register (Issue 5 – also available from the ATO website). Issue 5 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 (clause 3 of Schedule 1); and ● are marketed as a prepared meal. Issue 5 further provides some examples of prepared meals and includes: ● curry and rice dishes, mornays 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 dinner including vegetables and low fat dietary meals). Issue 5 also explains that for food to be considered as a prepared meal, 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. | Detailed Reasoning - Classification of your food products: (1) Salads with no meat (prepared, pre-packaged and customer selected). You do not provide table service or differentiate in any way the salads that may be consumed in the food court. The salads are sold cold in take-away plastic containers and you cannot determine if a customer will consume the salad in or away from the food court. None of these salads are specifically listed in Issue 5 and are not marketed as prepared or complete meals. Further to this, the GST food guide (another publication available from the ATO website) provides that salads, including pasta, rice, coleslaw, meat, seafood and green salad, sold from salad bars at supermarkets in either the delicatessen section or from a self-serve bar, are GST-free only if they are not marketed as prepared meals. The principle here is that salads not consumed on the premises from where they are purchased and not marketed as a prepared meal will be GST-free. Consequently, in accordance with paragraph 4 of GSTD 2000/5, you can treat the supply of these salads as GST-free under section 38-2 of the GST Act. (2) Salads with meat. These include your salads where meat (hot or cold) can be purchased with the salad and salads that come with a meat component. Cold shredded meat can also be selected by a customer when they make up a salad at the salad bar. A salad with meat does have the necessary balanced components to consider it as a prepared meal. However, Issue 5 makes it clear that for GST purposes a product (unless specifically mentioned in Issue 5) can only be considered a prepared meal if it is marketed as such. Marketing would include things such as advertising and packaging. These products are not specifically listed in Issue 5 and you do not market this combination of food as prepared meals. Issue 5 also makes it clear that for a product to be treated as a prepared meal, the food needs to be supplied assembled and dressed (if applicable). In your case, apart from the salads that come with a meat component, the meat and salad components are not assembled. In the case of the salads that come with a meat component, the GST food guide (another publication available from the ATO website) provides that salads can include meat and seafood salads. Given this, the supply of a salad with some meat (including the salads that come with a meat component) would be GST-free provided the meat is cold. Where a customer requests some meat and that meat is served hot, there would be a taxable supply with GST payable on the meat component of the purchase. (3) Bottled water and bottled fruit juice. The beverages are in their original containers and remain unopened when sold. The fruit juice is also at least 90% by volume of juices of fruits (thus not excluding its supply from being GST-free). Given this, and for the same reasons given in (1), paragraph 4 of GSTD 2000/5 can be applied, thus making the sale of these products GST-free under section 38-2 of the GST Act. (4) Other products. Your customers can ask for these products to be heated. Where a product is served hot then it would be taxable. One of the products is specifically mentioned in Issue 5 as being a prepared meal so it will be taxable regardless of whether it is served hot or cold. Another one of the products by themselves cannot be considered as being a prepared meal and is not listed in Issue 5. Consequently, the supply of this product would be GST-free when sold cold. In the case of the remaining products, they are marketed by you as salads (appearing on your salad menu listing. As stated in (1), salads not consumed on the premises from where they are purchased and not marketed as a prepared meal will be GST-free.

This notice must not be taken to imply anything about: | ● the binding nature of the private advice issued to the applicant | ● the correctness of other edited versions. | Edited versions cannot be relied upon as precedent or used for determining how the ATO will apply the law in other cases.