Is the supply of the product GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
No. This ruling applies for the following period : XX XXX 20XX - XX XXX 20XX
You are registered for GST. You supply a food product (the Product). The Product is made from X. The Product has a soft and spongy texture. The Product tastes X.
A New Tax System (Goods and Services Tax) Act 1999 section 9-5 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 section 38-4
A supply is a taxable supply under section 9-5 of the GST Act if all the following conditions are met: (a) the supply is made for consideration; and (b) the supply is made in the course or furtherance of an enterprise that the supplier carries on; and (c) the supply is connected with the indirect tax zone; and (d) the supplier is registered, or required to be registered, for GST. However, a supply is not a taxable supply to the extent that it is GST-free or input taxed. GST-free supply 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 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 Product is food for human consumption under 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 third column of the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). The Product is not specifically listed in Schedule 1. As such, the issue is whether the Product is 'food of a kind' specified in Schedule 1. 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 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. In addition, Lansell House Pty Ltd v FCT
[2011]FCAFC 6 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... Item 20 Item 20 in Schedule 1 (item 20) lists bakery products cakes, slices, cheesecakes, pancakes, waffles, crepes, muffins and puddings. These terms are not defined in the GST Act and are therefore afforded their ordinary meaning. Issue 13 of the Food Industry Partnership - Issues Register (Issue 13) considers the definition of pudding for the purposes of item 20 as being:
'a cooked food that is a sweet or savoury dish made in many forms and of various ingredients, as flour (or rice, tapioca, or the like), milk and eggs, with or without fruit, meat or other ingredients and is a cooked dish consisting of various sweet or savoury ingredients, especially as enclosed within a flour-based crust or mixed with flour, eggs, etc., and boiled or steamed; a baked batter mixture.' Although 'X' are incorporated under the category 'Bakery products', the category headings are not operative, as per Note 2 in Schedule 1 and section 182-15 of the GST Act. Application of the law to the Product The Product is made from X that is X in X. It has a soft and spongy texture and tastes X. We consider that the Product is a kind of X that is covered by item X because: • it is a cooked food; • it has a X character; • its soft and spongy texture is similar to a X • its main ingredient is a common ingredient of a X.
As the Product is food of a kind specified in Schedule 1, the supply of the Product is excluded from being GST-free. Therefore, the supply of the product is a taxable supply provided the requirements in paragraphs 9-5 (a) to 9-5(d) of the GST Act are satisfied You believe that the Product may be classified as X which is listed in the DFL as GST-free. We do not agree with your view. The term 'X', is neither defined in the GST Act nor defined in the Macquarie or Oxford dictionaries. It is an accepted generic term used by food retailers to describe X products that consist mainly of X or X based ingredients. Additionally, whilst the DFL provides that 'X' are GST-free this does not mean that all X X or X are GST-free. X or X will not be GST-free if they are of a kind of food listed in Schedule 1.