GST and frozen raw frankfurt in pastry

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 frozen raw frankfurt in pastry?

No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies a frozen raw frankfurt in pastry.

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

The entity is a food supplier. The entity supplies a frozen raw frankfurt in pastry.

The product consists of a raw frankfurt wrapped in puff pastry with other raw ingredients. The product is supplied frozen, presented on a tray and wrapped in cling wrap. The product cannot be consumed until it has been baked.

The entity is registered for goods and services tax (GST) and 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 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 frankfurt in pastry 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 specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1).

Item 22 in Schedule 1 (Item 22) lists pies (meat, vegetable or fruit), pasties and sausage rolls. Therefore, it must be determined whether a frozen raw frankfurt in pastry is a kind of pie (meat, vegetable or fruit), 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, 3rd edn, The Macquarie Library Pty Ltd, NSW 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 kind 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 term 'sausage roll' is not defined in the GST Act and therefore, takes on its ordinary meaning. The Macquarie Dictionary 1997 defines sausage roll to mean 'a roll of baked pastry filled with sausage meat'. A sausage roll is generally made of puff pastry. The pastry dog consists of a raw frankfurt wrapped in puff pastry with other raw ingredients and is a kind of sausage roll.

In addition, clause 2 of Schedule 1 operates to ensure that foods in the table relating to the category of prepared food, bakery products or biscuit goods, are not GST-free regardless of whether they are supplied hot or cold, or require cooking, heating, thawing or chilling prior to consumption. Item 22 relates the category of bakery products. Therefore, even though the pastry dog is raw and frozen, it is 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 a frozen raw frankfurt in pastry.

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 a frozen raw frankfurt in pastry.