• Issue 16

    Are coffee beans and green tea subject to GST?

    For source of ATO view, refer to the Detailed food list

    A supply of food for human consumption is generally GST-free under section 38-2 of the GST Act.

    Section 38-4 of the GST Act defines food to include:

    "(c) beverages for human consumption;
    (d) ingredients for beverages for human consumption..."

    Paragraph 38-3(1)(d) of the GST Act states that, food is not GST-free under section 38-2 if it is a supply of a beverage (or an ingredient for a beverage), other than a beverage (or ingredient) of a kind specified in the third column of the table in clause 1 of Schedule 2.

    Schedule 2 of the GST Act specifically lists the following ingredients for beverages as being GST-free:

    Clause 1, item 5 of Schedule 2 of the GST Act:

    "tea (including herbal tea, fruit tea, ginseng tea and other similar beverage preparations), coffee and coffee essence..."

    Item 7:

    "preparations for drinking purposes that are marketed principally as tea, coffee preparations..."

    Coffee Beans

    The ATO is of the view that both roasted and green coffee beans that are an ingredient for a beverage for human consumption will be GST-free in accordance with item 5 of Schedule 2 of the GST Act.

    Green tea

    Information from industry is that green tea goes through the following processes after it is picked. Processing for green tea is different from processing for black tea. To make black tea, the fresh leaf is withered by exposure to air and is broken and left to ferment after picking.

    For green tea, the leaf is not fermented at all. Instead, it is steamed and heated immediately after harvesting to stop the fermentation process. This softens the leaves for rolling and keeps the juices from oxidising. The steamed leaves are then rolled and dried, loosening the fibres, which brings out the flavour in the whole leaf. In the process of rolling the tea leaves become twisted. At first the tea leaves are rolled coarsely and then are rolled more finely to give it a uniform twist. The water content is reduced to protect it from changes in quality.

    Finally the tea is sorted and the stems and dust are removed and the leaf shape and size are arranged before it is finished as tea that is in its final form as a preparation for a beverage. At this point the green tea is GST-free as an "ingredient for a beverage for human consumption" - paragraph 38-4(1)(d) of the GST Act.

    However, this does not include beverages marketed in a ready-to-drink form (for example, iced tea and takeaway tea), as these types of beverages are specifically excluded by Clause 2 of Schedule 2 of the GST Act.

      Last modified: 05 Aug 2016QC 16451