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 sells gingerbread?
Decision
No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells gingerbread. The entity is making a taxable supply under section 9-5 of the GST Act.
Facts
The entity is a food supplier that sells gingerbread. Gingerbread is a kind of cake, flavoured with ginger and treacle or golden syrup.
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
A supply of food is GST-free under section 38-2 of the GST Act if it satisfies the definition of food in section 38-4 of the GST Act and it does not come within any of the exclusions listed in section 38-3 of the GST Act.
Food is defined in paragraph 38-4(1)(a) of the GST Act to include 'food for human consumption (whether or not requiring processing or treatment)'. Gingerbread satisfies the definition of food in section 38-4 of the GST Act because it is food for human consumption.
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 that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 20 in Schedule 1 (Item 20) relates to 'Bakery products' and is of particular relevance.
Item 20 specifies that cakes, slices, cheesecakes, pancakes and waffles are not GST-free. As gingerbread is a kind of cake, it is considered to be food of a kind specified in Item 20. As such, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells gingerbread.
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 sells gingerbread.