GST and commercial operations of an education institution

Is the entity, an education institution, making a GST-free supply under Division 38 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies food and beverages to the public through a restaurant that the entity operates?

No, the entity is not making a GST-free supply under Division 38 of the GST Act, when it supplies food and beverages to the public through a restaurant that the entity operates.

The entity is making a taxable supply under section 9-5 of the GST Act.

The entity is an education institution that supplies a vocational education and training course. The supply of the course is a GST-free education course under section 38-85 of the GST Act.

The entity operates a restaurant that supplies food and beverages to the public. The entity's students are involved in running the restaurant as part of the training within the course. The training the students undertake in the restaurant include food preparation, performing as waiters/waitresses and restaurant management. The supply and consumption of the food takes place in the restaurant.

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.

Division 38 of the GST Act provides that certain supplies are GST-free.

Under section 38-85 of the GST Act, a supply of an education course is GST-free. The students prepare and provide food and beverages at the restaurant as part of their training. The supply of an education course to the students and the supply of food and beverages to the public, through the restaurant, are two distinct and separate supplies.

While the supply of the course to the student is a supply of an education course under section 38-85 of the GST Act, the supply of food and beverages made through the restaurant is not the supply of an education course under section 38-85 of the GST Act.

Under section 38-2 of the GST Act, a supply of food is GST-free in certain circumstances. However, paragraph 38-3(1)(a) of the GST Act provides that a supply of food is not GST-free if it is food for consumption on the premises from which it is supplied. The restaurant is the premises from which both the supply and consumption of the food takes place. Therefore, the entity's supply is not a GST-free supply of food.

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 any other provision of 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 food and beverages to the public through a restaurant that it operates.

[Note: If the entity is a charitable institution, a trustee of a charitable fund, a gift deductible entity or a government school, it may need to consider the provisions of section 38-250 of the GST Act which relates to supplies made for nominal consideration.]