ATO Interpretative Decision
ATO ID 2001/372
Goods and Services Tax
GST and unfermented grape juiceFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells 100% unfermented grape juice?
Decision
No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells 100% unfermented grape juice. The entity is making a taxable supply under section 9-5 of the GST Act.
Facts
The entity is a food supplier. The entity sells 100% unfermented grape juice. The unfermented grape juice is not supplied as a beverage until it is further processed.
Grape juice is grape must (the liquefied product from the process of crushing grapes containing liquid, pulp, skins and seeds) that has the skins and seeds removed but not all of the pulp. The grape juice still contains approximately 5-8% solids. Grape juice can be used in the manufacture of both alcoholic and non-alcoholic beverages.
The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.
Reasons for Decision
A supply of food is GST-free under section 38-2 of the GST Act, provided that it does not come within any of the exclusions listed in section 38-3 of the GST Act. Paragraphs 38-4(1)(c) and 38-4(1)(d) of the GST Act define food to include beverages and ingredients for beverages for human consumption.
Unfermented grape juice requires further processing before it can be consumed as a beverage. Therefore, it is not a beverage and does not satisfy the definition of food contained in paragraph 38-4(1)(c) of the GST Act. The unfermented grape juice is used as an ingredient for beverages and therefore satisfies the definition of food contained in paragraph 38-4(1)(d) of the GST Act.
However, under paragraph 38-3(1)(d) of the GST Act, a supply of food is not GST-free if it is an ingredient for a beverage, other than an ingredient, of a kind, that is specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2).
The only ingredient for a beverage of relevance to this case is item 10 in Schedule 2 (Item 10). Item 10 provides that concentrates for making non-alcoholic beverages, if the concentrates consist of at least 90% by volume of juices of fruit, are GST-free.
The unfermented grape juice that the entity supplies is not a concentrate and therefore does not fall within Item 10. The supply of unfermented grape juice is not a supply of food that is GST-free under section 38-2 of the GST Act.
The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells 100% unfermented grape juice.
Date of decision: 9 August 2001
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
Division 38
section 38-2
section 38-3
paragraph 38-3(1)(d)
paragraph 38-4(1)(c)
paragraph 38-4(1)(d)
Division 40
Schedule 2 clause 1
Schedule 2 clause 1 table item 10
ATO ID 2001/373
Keywords
Goods & services tax
GST food
GST beverages
Ingredients for beverages
ISSN: 1445-2782