ATO Interpretative Decision
ATO ID 2003/1181
Goods and Services Tax
GST and yoghurt drink powderFOI 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 supplies yoghurt drink powder?
Decision
No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies yoghurt drink powder.
The entity is making a taxable supply under section 9-5 of the GST Act.
Facts
The entity is a food supplier. The entity is supplying yoghurt drink powder. The yoghurt drink powder is a powdered ingredient that can be mixed with water, milk or soy milk to make a yoghurt drink.
The product is not marketed for the purpose of flavouring milk. It is marketed as a yoghurt drink powder and the directions for use indicate that it can also be added to cold water rather than milk.
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 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 ingredients for beverages for human consumption (paragraph 38-4(1)(d) of the GST Act). The yoghurt drink powder is an ingredient for a beverage for human consumption and therefore satisfies the definition of food in paragraph 38-4(1)(d) of the GST Act.
However, paragraph 38-3(1)(d) of the GST Act provides that ingredients for beverages are only GST-free if they are of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2).
Item 9 in Schedule 2 (Item 9) lists dry preparations marketed for the purpose of flavouring milk. The product is not marketed for the purpose of flavouring milk. It is marketed as a yoghurt drink powder and the directions for use indicate that it can also be added to cold water rather than milk. As such, the yoghurt drink powder is not covered by Item 9. There are no other items in Schedule 2 that would cover yoghurt drink powder. Therefore, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells yoghurt drink powder.
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 any other provision in 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 supplies yoghurt drink powder.
Date of decision: 20 June 2002
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)
section 38-4
paragraph 38-4(1)(d)
Division 40
Schedule 2 clause 1
Schedule 2 clause 1 table item 9
Keywords
Goods and services tax
GST free
GST food
Ingredients for beverages
Taxable supply
ISSN: 1445-2782