GST and supply of a bread pretzel

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 a bread pretzel?

Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies a bread pretzel.

The entity is a food supplier. The entity supplies a bread pretzel.

The bread pretzel is a bread product and is similar to bread rolls or bagels. The bread pretzel resembles a pretzel in shape. The bread pretzel is not a biscuit and is not salted on the outside. The bread pretzel does not have a sweet filling or coating. The entity does not supply the bread pretzel for consumption on the premises from which it is supplied.

The entity is registered for goods and services tax (GST).

A supply of food 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 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 bread pretzel is food for human consumption and therefore, satisfies 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 that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1).

Item 27 and item 32 in Schedule 1 (Item 27 and Item 32) are relevant in this instance.

Item 27 lists bread (including buns) with a sweet filling or coating. The bread pretzel does not have a sweet filling or coating and as such, is not covered by Item 27.

Item 32 lists food that is, or consists principally of, biscuits, cookies, crackers, pretzels, cones or wafers. 'Pretzel' is defined in The Macquarie Dictionary (1997), 3rd edn, The Macquarie Library Pty Ltd, New South Wales, as 'a crisp, dry biscuit, usually in the form of a knot or stick, salted on the outside.'

The bread pretzel in question is a bread product and is similar to other bread products such as bread rolls or bagels. The bread pretzel is not a biscuit, nor is it salted on the outside. The product merely resembles a pretzel in shape and is not a 'pretzel' as defined in The Macquarie Dictionary, 1997. Accordingly, the bread pretzel is not covered by Item 32. As such, the excluding provisions of paragraph 38-3(1)(c) of the GST Act do not apply.

In addition, the supply of the bread pretzel does not fall within any of the other exclusions in section 38-3 of the GST Act.

Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies a bread pretzel.