GST and mushroom borekas

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 mushroom borekas?

No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies mushroom borekas. 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, mushroom borekas. The mushroom borekas are a round scroll shaped pastry product with a savoury mushroom filling.

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. The mushroom borekas are food for human consumption and, therefore, satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act.

However, under 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 22 of Schedule 1 (Item 22), which provides that 'pies (meat, vegetable or fruit), pasties and sausage rolls' are not GST-free. Therefore, it must be determined whether the mushroom borekas are a kind of pie, pastie or sausage roll.

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.

The Macquarie Dictionary (1997) defines 'pastie' as 'a type of pie in which a circular piece of pastry is folded around a filling or vegetables, meat, etc and baked.'

The mushroom borekas consist of pastry folded round a savoury mushroom filling which is then baked. Therefore, the mushroom borekas are a kind of pastie that is covered by Item 22.

Clause 2 of Schedule 1 of the GST Act (Clause 2) operates to ensure that food listed at Item 22 is not GST-free regardless of whether it is supplied hot or cold, or requires cooking, heating, thawing or chilling prior to consumption.

Therefore, although the mushroom borekas are raw and frozen they are still 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 mushroom borekas.

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 mushroom borekas.