Private ruling: GST and food classification
Date of advice: 13 August 2018
Published: October 2018

Ruling: Q1: Is the supply of the specified food products (products) a GST-free supply for the purposes of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No. The supply of the products is a taxable supply where all the other requirements of section 9-5 of the GST Act are met.

Relevant facts and circumstances: You supply the frozen products to grocery stores and cafes. The products are food fillings wrapped in flat bread. Directions for use: Cook the products in the microwave, oven, or put them in the grill. The preparation instructions for consumers do not include any separately acquired ingredient(s). The products can be a snack or light meal, or they can be eaten with a salad or another accompany as a meal.

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. | A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-4(1)(b). | A New Tax System (Goods and Services Tax) Act 1999 Schedule 1

Reasons for decision: Summary: The supply of the products is a supply of prepared food of a kind covered under item 2 ( sandwiches- using any type of bread or roll ) specified in the third column of the table in clause 1 of schedule 1 (Schedule 1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). The supply of the products is therefore excluded from being GST free by paragraph 38-3(1)(c) of the GST Act. The supply of the products is a taxable supply where all the other requirements of section 9-5 of the GST Act are met. | Detailed Reasoning - Detailed reasoning: A supply of a product 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). The products are considered food for human consumption and satisfies the definition of food in subsection 38-4(1) of the GST Act However, subsection 38-3(1) of the GST Act states: A supply is not GST-free under section 38-2 if it is a supply of: (a) *food for consumption on the *premises from which it is supplied; or (b) hot food for consumption away from those premises; or (c) food of a kind specified in the third column of the table in clause 1 of Schedule 1, or food that is a combination of one or more foods at least one of which is food of such a kind; or (d) a *beverage (or an ingredient for a beverage), other than a beverage (or ingredient) of a kind specified in the third column of the table in clause 1 of Schedule 2; or (e) food of a kind specified in regulations made for the purposes of this subsection. * denotes a defined term in the GST Act The paragraph that may apply to your supply is paragraph 38-3(1)(c) of the GST Act. Food of a kind specified in the third column of the table in clause 1 of Schedule 1 is excluded from being GST-free. Of a kind 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 kind of hero. 4...' In sales tax cases and when determining the phrase ‘of a kind’, the Courts have determined the ’essential character of the goods‘. Essential character derives from the basic nature of the goods, from what they are, though composition, function and other factors necessarily play a part. The GST case Lansell House Pty Ltd & Anor FC of T 2010 ATC 10851 ( Lansell 2010 ) did not provide an essential character test, rather it provided an overall impression test. Sunberg J held that the words in item 32 are not used in a specialised or trade sense that differs from their ordinary usage, and that it is a matter of overall impression in deciding the proper classification of a product. Please note that this Federal Court decision has been upheld by the Full Federal Court, hence this quote from the Federal Court decision is still relevant. 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. In addition, the case law Lansell House Pty Ltd & Anor v FC of T 2011 ATC 20-239 (Lansell 2011 ) at [30] relevantly provides: The use of the words "of a kind" in s 38-3(1)(c) of the GST Act adds further generality to the description of the items described in Schedule 1: Air International Pty Ltd v Chief Executive Officer of Customs (2002) 121 FCR 149 per Hill J. Thus, a new product that does not possess all of the same characteristics of known crackers may nevertheless be within the relevant item… We will apply the principles in Lansell 2010 and Lansell 2011 to the products to determine whether the products are ‘of a kind’ of item 2 specified in Schedule 1(Item 2). You contend the products are similar to a samosa, a vegetable/beef or chicken parcel or even a spring roll. The preparation instructions for consumers do not include any separately acquired ingredient(s).The products can be a snack or light meal, or they can be eaten with a salad or another accompany as a meal. The food listed in Item 2 is sandwiches (using any type of bread or roll). The Macquarie Dictionary provides that 'bread' means " a food made of flour or meal, milk or water, etc., made into a dough or batter, with or without yeast or the like, and baked" . We consider that a sandwich is a food that is made of bread or roll wrapping around food fillings. The public ruling, "Goods and Services Tax Industry Issues - Detailed Food List" lists examples of food covered by Item 2. A detailed list of Food products were listed which have fillings wrapped in a bread product, similar to a sandwich. They are food of a kind listed under Item 2 and are therefore excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. The products have food fillings wrapped in a type of flat bread, similar to the food products detailed list. We consider that they are prepared food of a kind covered under Item 2 Directions for use: Cook the products in the microwave, oven, or put them in the grill. Please note : Clause 2 of Schedule 1 provides that when considering food listed in items 1 to 7 of Schedule 1, it does not matter whether the food is sold hot, cold or frozen or require cooking, heating, thawing or chilling prior to consumption. Therefore, the food listed in Item 2 could include frozen prepared foods such as the products. In summary, the supply of the products will not be GST-free under section 38-2 of the GST Act as the products are excluded from being GST-free by paragraph 38-3(1)(d) of the GST Act. The supply of the products is a taxable supply where all the other requirements of section 9-5 of the GST Act are met.