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Edited version of your written advice

Authorisation Number: 1051256135180

Date of advice: 21 July 2017

Ruling

Subject: Goods and Services Tax (GST) and ready-to-drink beverages

Question 1

Is ready-to-drink fermented tea GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No, ready-to-drink fermented tea is not GST-free under section 38-2 of the GST Act.

Relevant facts and circumstances

You are registered for GST.

You manufacture and distribute ready-to-drink fermented teas.

These products are packaged in glass bottles.

You are marketing these products on Social Media and via word of mouth through family and friends.

You are planning to sell these products to health food stores, cafes and similar retailers.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

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 paragraph 38-3(1)(d)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 38-3(3)

A New Tax System (Goods and Services Tax) Act 1999 section 38-4

A New Tax System (Goods and Services Tax) Act 1999 paragraph 38-4(1)(c)

A New Tax System (Goods and Services Tax) Act 1999 clause 1 of Schedule 2

A New Tax System (Goods and Services Tax) Act 1999 clause 2 of Schedule 2

A New Tax System (Goods and Services Tax) Act 1999 item 5 of Schedule 2

Reasons for decision

A supply is taxable to the extent that it is not GST-free or input taxed. There are no provisions that would result in the supply being input taxed. However, we need to consider the GST-free provision. In particular, a supply of food is GST-free under section 38-2 of the GST Act if it satisfies the definition of food in section 38-4 of the GST Act and it does not come within any of the exclusions listed in section 38-3 of the GST Act.

Paragraph 38-4(1)(c) of the GST Act defines 'food’ to include beverages for human consumption. It is considered that fermented tea based drinks are beverages for human consumption.

However, under paragraph 38-3(1)(d) of the GST Act, a supply of a beverage is not GST-free unless it is a beverage, or an ingredient for a beverage, of a kind specified in the table in clause 1 of Schedule 2 of the GST Act (Schedule 2).

Furthermore, subsection 38-3(3) of the GST Act provides that the items in the table in clause 1 of Schedule 2 are to be interpreted subject to the other clauses of Schedule 2.

Item 5 of Schedule 2 provides that tea (including herbal tea, fruit tea, ginseng tea and other similar beverages preparations) are GST-free.

Clause 2 of Schedule 2 then states that none of the items in the table relating to tea include any beverage that is marketed in a ready-to-drink form. This means that any tea (including herbal tea, fruit tea, ginseng tea etc) that is marketed in a ready-to-drink form will not be GST-free.

As all of your products are packaged and will be sold in bottles ready for the consumers to drink straight away, they fall within clause 2 of Schedule 2. Hence, your products will not be GST-free.

Your products will be sold in Australia at particular prices and as part of your enterprise in which you are registered for GST. Thus, the sales of these products satisfied section 9-5 of the GST Act and are taxable.