Preamble
No, supplies of food known as breakfast bars are not GST-free and are therefore taxable supplies if all the other requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) are met.
The GST Act provides that many supplies of food are GST-free. A supply of food is GST-free [1] if the product is food as defined in the GST Act and the supply is not excluded from being GST-free by the GST Act. [2] As food for human consumption, breakfast bars satisfy the definition of food. [3]
However, the GST Act also provides that supplies of certain specified food are not GST-free. That is, food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act is not GST-free, nor is food that is a combination of one or more foods at least one of which is food of such a kind. [4]
Item 11 of Schedule 1 to the GST Act (Item 11) specifies 'food known as muesli bars or health food bars, and similar foodstuffs'. Therefore, supplies of food known as muesli bars, health food bars and foodstuffs of a similar kind are not GST-free.
The use of the words 'known as' in Item 11 does not indicate a specific marketing test. That is, foodstuffs do not have to be actually labelled 'muesli bars' or 'health food bars', to be food known as muesli bars or health food bars. Rather, the terms 'muesli bars' and 'health food bars' are broad terms which are commonly used by sellers and consumers, indicating classes of products. Therefore, the Commissioner considers that the ordinary usage of these terms is appropriate in determining whether food known as breakfast bars fall within Item 11.
The term 'muesli bar' is not defined in the GST Act, so the ordinary meaning of the term applies. The dictionary definition of muesli bar is 'a commercially-prepared and packaged snack made from a muesli mixture, usually sweetened and set in a bar shape'. [5] Muesli is defined as 'a breakfast cereal of various mixed products such as oats, wheat germ, chopped fruit and nuts, etc'. [6]
A typical muesli bar contains ingredients similar to those found in muesli breakfast cereals, plus additional sugars and other ingredients necessary to achieve a consistency suitable for presentation in bar form. Some muesli bars contain confectionery pieces such as chocolate chips or chocolate, yoghurt or other flavoured coatings.
Item 11 specifies 'foods known as muesli bars or health food bars, and similar foodstuffs'. The ordinary meaning of 'similar' is 'having likeness or resemblance, especially in a general way'. [7] Therefore, foods that resemble muesli bars in a general way, having regard to their essential character, are considered to be similar foodstuffs and therefore within the class of foods specified in Item 11.
The characteristics of muesli bars that form a basis for comparison with other products may be categorised as: • physical presentation; and • ingredients.
Muesli bars are shaped in the form of a bar for ease of eating. The size of muesli bars is appropriate for a single serving.
The texture of muesli bars varies from chewy to crunchy. Muesli bars are usually individually wrapped when sold, either individually or packaged in boxes.
To be similar to a muesli bar, a product would need to have a similar physical presentation.
To be similar to muesli bars, it would be expected that the foodstuff would contain some or all of the ingredients common to muesli bars as described above.
Some products available on the market are known as 'breakfast bars'. The term 'breakfast bar' is not used in the GST Act.
Products known as breakfast bars may include the words 'breakfast bars' on their packaging and usually: • consist predominantly of cereals and sugars and may contain other ingredients such as fruits and/or nuts; and • are of a similar size and shape to muesli bars.
It is the Commissioner's view that breakfast bars resemble muesli bars in the manner of their physical presentation as they are of similar shape and size, and contain similar ingredients.
As breakfast bars are similar in character to muesli bars, they satisfy the description of 'similar foodstuffs'. Therefore, breakfast bars are food of a kind specified at Item 11. As paragraph 38-3(1)(c) of the GST Act provides that food of a kind specified in Schedule 1 to the GST Act is not GST-free, supplies of breakfast bars are taxable supplies if all the requirements of section 9-5 of the GST Act are met.
As breakfast bars are similar to muesli bars, we do not consider it necessary to consider whether they are also similar to health food bars.
This Determination applies [to tax periods commencing] both before and after its date of issue. However, this Determination will not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of this Determination (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10).
[Omitted.]
Compendium
The ATO published responses to 5 submissions on this ruling in GSTD 2008/2EC. Outcome labels are heuristic — read the ATO response for the detail.
1The decision to treat Breakfast Bars as taxable should be a prospective. Prospective treatment would ensure consistency with previous decisions of the Tax Office in circumstances where classification decisions on specific foodstuffs or food groups have been unduly protracted. Examples include 'fish in sauce' and pita crisps.response provided
ATO response
The final Determination, and therefore the Tax Office view to treat food known as breakfast bars as taxable, applies before and after the date of its issue. Tax Office will implement the view in the final Determination for transactions that occur on or after the date of issue. See also response to Issue 5 below.
2The draft Determination does not adequately address and discuss the relevant provisions of the legislation. Specifically: • The Draft Determination should discuss the impact of the phrase 'of a kind' in establishing the meaning given to the phrase 'muesli bars or health food bars, and similar foodstuffs.' • There should also be some discussion of the possibility that breakfast bars might be a combination of any of the 32 items of food listed in the third column of the table in Schedule 1. • Some discussion should be included to explain how, for example, provisions 182-15 and 182-10 of the GST Act apply to second column headings like 'confectionary' and whether they apply or not to the classification of breakfast bars.response provided
ATO response
Discussion of the phrase 'of a kind' would add little value to the Determination, as the taxable status of food items under Item 11 is based on foods 'known as' muesli bars and health food bars and 'other similar foodstuffs'. The Tax Office does not consider that discussion on the possibility that food known as breakfast bars might be combination of food items in Schedule 1 would add value to the Determination as the relevant item for these products is Item 11. Given that paragraph 38-3(1)(c) contains two alternatives and that the conclusion reached is that food known as breakfast bars fall within Item 11, it is considered unnecessary to discuss whether food known as breakfast bars may be a combination of food that is listed in the table in clause 1 of Schedule 1. The Tax Office does not consider that any discussion of the application of the second column headings would add value to the Determination.