1 Is the supply of the Pastry Product GST-free pursuant to section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
1 No.
You manufacture the Pastry Product that is made of raw uncooked pastry and a cooked filling that is supplied chilled and ready to cook. The ingredients include a meat and vegetable filling with herbs and spices. The Pastry Product needs to be kept refrigerated and stored at below a certain temperature. The instruction is to place the Pastry Product on a preheated baking tray and cook in an oven over a certain temperature for a specified period or until fully cooked and golden brown, with an option to brush the top of the Pastry Product with an egg wash. You provided the production process for the Pastry Product. The Pastry Product is sold in supermarkets nationally and placed near the meat cabinets. You provided samples of the Pastry Product. It is an uncooked shaped pastry wrapped around a filling of a mixture of meat and vegetables with added herbs and spices. The edges of the pastry have been folded and crimped to seal the filling.
A New Tax System (Goods and Services Tax) Act 1999 section 38-2 A New Tax System (Goods and Services Tax) Act 1999 section 38-3 A New Tax System (Goods and Services Tax) Act 1999 paragraph 38-3(1)(c) A New Tax System (Goods and Services Tax) Act 1999 section 38-4 A New Tax System (Goods and Services Tax) Act 1999 paragraph 38-4(1)(a) A New Tax System (Goods and Services Tax) Act 1999 Schedule 1, Clause 1, item 22
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 from being GST-free by section 38-3 of the GST Act. Food is defined to include food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act). The Pastry Product 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) provides that a supply of food is not GST-free if it is food 'of a kind' listed in the third column of the table in clause 1 of Schedule 1 (Schedule 1). The Pastry Product is not specifically listed in Schedule 1. As such, the issue is whether the Pastry Product is 'food of a kind' specified in Schedule 1. The item in Schedule 1 that is of most relevance to this case is Item 22 which lists 'pies (meat, vegetable or fruit), pasties and sausage rolls'. The phrase 'of a kind' is not defined in the GST Act. The phrase was considered Lansell House Pty Ltd & Anor v FC of T 2011 ATC 20-239 (Lansell House) at [30] relevantly provides:
The use of the words "of a kind" in s 38-3(1)(c) of the GST Act adds further generality to the description of the items described in Schedule 1: Air International Pty Ltd v Chief Executive Officer of Customs (2002) 121 FCR 149 per Hill J. Thus, a new product that does not possess all of the same characteristics of known crackers may nevertheless be within the relevant item... In coming to its decision, Lansell House also considered, among other things, the product's • use • in store display • marketing and • appearance. 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. Issue 30 of the Food Industry Partnership - Issues Register (Issue 30) provides the ATO view on pastry products. Issue 30 refers to the following dictionary definitions of items listed in Item 22: Pie - a baked dish consisting of a sweet (fruit, etc.) or savoury (meat, fish, etc.) filling, enclosed in or covered by pastry, or sometimes other topping as mashed potatoes
Pastie - a type of pie in which a circular piece of pastry is folded around a filling of vegetables, meat, etc., and baked Sausage roll - 'a roll of baked pastry filled with sausage meat'. In ATO Interpretative Decision ATO ID 2002/119 Goods and Services Tax GST and potato borekas, the potato borekas are a roll shaped pastry product with a savoury potato filling.The Commissioner expressed the view that, despite their shape, the potato borekas are a kind of pie or pastie because they consist of pastry folded around a savoury potato filling which is then baked. Thus, the supply of the potato borekas are not GST-free because the potato borekas are covered by Item 22. This indicates that for the purposes of Item 22, the shape of the food item (i.e. whether round or a roll) and the type of pastry used are not considered determinative of the nature or quality of food that is of a kind of pie or pastie.
In this case, the Pastry Product consists of pastry folded around a cooked savoury meat and vegetable filling. We consider the Pastry Product to be of the same nature and characteristic as that generally called a pastie, which is a pastry folded around a filling of vegetables, meat, etc. Hence, the Pastry Product is 'of a kind' of a pastie referred to in Item 22. Clause 2 of Schedule 1 of the GST Act (Clause 2) operates to ensure that foods listed at Item 22 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 Pastry Product is supplied chilled and raw and must be baked before consumption, it is still food of a kind listed at Item 22 in Schedule 1. As such, you are not making a GST-free supply under section 38-2 of the GST Act when you supply the Pastry Product.