GST and cinnamon buns

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 cinnamon buns?

No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies cinnamon buns. The entity is making a taxable supply under section 9-5 of the GST Act.

The entity is a food supplier. The entity supplies uncooked frozen cinnamon buns.

The cinnamon buns do not have a sweet filling or coating. The ingredients include eggs and yeast.

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.

A supply of food is GST-free under section 38-2 of the GST Act provided that it does not come within any of the exclusions listed in section 38-3 of the GST Act.

Food is defined in section 38-4 of the GST Act to include food for human consumption (paragraph 38-4(1)(a) of the GST Act). Cinnamon buns are food for human consumption and, therefore, satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act.

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 specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1).

Item 25 of Schedule 1 (Item 25) provides that 'pastizzi, calzoni and brioche' are not GST-free. Therefore, it must be determined whether the cinnamon bun is a kind of pastizzi, calzoni or brioche.

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 king of hero. 4 ...'

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.

'Brioche' is defined in The Macquarie Dictionary (1997) as 'a kind of light, sweet bun or roll, raised with eggs and yeast'. The cinnamon buns are a sweet buns whose ingredients include eggs and yeast. Accordingly, the cinnamon buns are food of the same class as brioche.

Clause 2 of Schedule 1 of the GST Act (Clause 2) operates to ensure that the foods listed at Item 25 are not GST-free regardless of whether they are supplied hot or cold, or require cooking, heating, thawing or chilling prior to consumption.

Therefore, although the cinnamon buns are supplied raw and frozen, they are still a food of a kind listed in Schedule 1. Thus, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies cinnamon buns.

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 supplies cinnamon buns.