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Edited version of private advice

Authorisation Number: 1051611368489

Date of advice: 5 December 2019

Ruling

Subject: GST and uncooked sausage rolls

Question

Is your supply of uncooked sausage rolls, containing raw meat, GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No, your supply of uncooked sausage rolls, containing raw meat, is not GST-free under section 38-2 of the GST Act. It is a taxable supply under section 9-5 of the GST Act.

Relevant facts and circumstances

You are registered for GST.

You manufacture sausage rolls and will supply uncooked sausage rolls containing raw meat mixed with other various ingredients.

You sausage rolls will be marketed as fresh sausage rolls requiring further baking.

Relevant legislative provisions

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 New Tax System (Goods and Services Tax) Act 1999 Schedule 1, Clause 1, item 22

Reasons for decision

All legislative references in this ruling are to the GST Act unless otherwise stated.

A supply of food is GST-free under section 38-2, if the product satisfies the definition of food in section 38-4 and the supply is not excluded from being GST-free by section 38-3.

Food is defined in paragraph 38-4(1)(a) to include food for human consumption (whether or not requiring processing or treatment). You manufacture the sausage rolls for human consumption and therefore, they satisfy the definition of food in paragraph 38-4(1)(a).

However, under paragraph 38-3(1)(c), a supply of food is not GST-free if it is a supply of food of a kind specified in the table in clause 1 of Schedule 1.

Therefore, it needs to be considered whether your sausage rolls are a 'food of a kind' specified in Schedule 1.

Item 22 in the table in Clause 1 of Schedule 1 is the most relevant item to your case as it 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 at paragraph 30 in Lansell House Pty Ltd & Anor v. FCT 2011 ATC 20-239 where the court provided further meaning of the phrase. Following is the relevant excerpt:

30....The phrase "of a kind" has been defined by the Oxford English Dictionary (Online edition, Oxford University Press 2010) as "of the same sort, not a typical or perfect specimen of the class". The word "kind" is appropriately used to denote a genus, class or description...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...The question is whether the resulting product comes within the genus, class or description of a cracker.

When classifying a food for the purposes of paragraph 38-3(1)(c), the term 'food of a kind specified' is a question of whether the product comes within the genus, class or description of the item listed.

Clause 2 of Schedule 1 further provides that, for the purpose of determining whether particular food is covered by any of the items in the table of Schedule 1 relating to the category of bakery products, it does not matter whether the food is supplied hot or cold, or requires cooking, heating or thawing or chilling prior to consumption.

In addition, paragraph 1.38 of Chapter 1 of the Further Supplementary Explanatory Memorandum (EM) to the A New Tax System (Goods and Services Tax) Bill 1998 provides that the bakery products listed in the Schedule will be taxable. It further explained the following:

·        the goods included in the list of bakery products will be taxable when sold by bakeries as well as by other businesses, and

·        it will not matter whether a bakery product is sold fresh or frozen.

The Macquarie Dictionary (2013) defines a 'sausage roll' as a roll of baked pastry filled with sausage meat.

Your sausage rolls are sold uncooked and are marketed as sausage rolls. They contain ground raw meat and other ingredients which are then wrapped in puff pastry. They require baking before consumption. Their appearance in terms of shape and size is similar, if not identical, to sausage rolls traditionally bought cooked in a bakery or frozen from a supermarket.

As per clause 2 of Schedule 1, for the purpose of determining whether your sausage rolls are covered by any items in the table of Schedule 1, it does not matter whether they are supplied hot or cold, or requires cooking, heating or thawing or chilling prior to consumption.

Given the above, we consider your uncooked sausage rolls are of a kind of sausage rolls listed in Item 22 of Schedule 1.

As such, its supply is not GST-free under section 38-2, rather it is a taxable supply under section 9-5.

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