ATO Interpretative Decision

ATO ID 2001/324 (Withdrawn)

Goods and Services Tax

• This ATO ID is withdrawn as the position stated in this ATO ID is no longer current. The current ATO position on this issue is contained in the Detailed Food List.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

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 soy milk powder?

Decision

No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells soy milk powder. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts

The entity is a food supplier that sells soy milk powder. The product is used as an ingredient to make drinks and milk substitutes.

The soy milk powder is not in a form that is ready to eat or drink.

The entity is registered for good 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 the supply does not come within any of the exclusions listed in section 38-3 of the GST Act.

Food is defined in paragraph 38-4(1)(d) of the GST Act to include ingredients for beverages for human consumption. Soy milk powder is used as an ingredient to make drinks and milk substitutes. Therefore, soy milk powder falls within the definition of food as it is an ingredient for beverages for human consumption.

However, under paragraph 38-3(1)(d) of the GST Act, the supply of an ingredient for a beverage is only GST-free if it is an ingredient of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2).

The categories of beverages in Schedule 2 that are of particular relevance to this case are 'milk products' and 'soy milk and rice milk'. Beverages consisting principally of soy milk is specified in item 4 of Schedule 2 (Item 4). However, in this case, the entity is making the supply of soy milk powder, which is not covered by Item 4.

Milk, skim milk or buttermilk (whether liquid, powdered, concentrated or condensed) are listed at item 1(a) of Schedule 2 and fall under the category 'milk products'. As such, they are specifically included as being GST-free. Therefore, it is necessary to determine whether soy milk powder is an ingredient that is a kind of milk powder, skim milk powder or buttermilk powder.

The word 'milk' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that term. The Macquarie Dictionary (1997) defines milk to mean:

'1. an opaque white or bluish white liquid secreted by the mammary glands of female mammals, serving for the nourishment of their young, and, in the case of the cow and some other animals, used by humans for food or as a source of dairy products. 2. Any liquid resembling this, as the liquid within a coconut, the juice or sap (latex) of certain plants, or various pharmaceutical preparations.'

Therefore, it is necessary to ascertain whether the reference to 'milk', in the category 'milk products' in Schedule 2, should be confined to mammalian milk; or whether the interpretation of the word 'milk' should also include plant milk (such as soy milk).

An accepted principle of statutory interpretation (the noscitur a sociis rule) states that words take their meaning from the words with which they are associated (Fox v. Warde [1978] VR 362: Supreme Court of Victoria). As such, the meaning of the word 'milk' can be derived from the context of the surrounding words used in the items in the category 'milk products' in Schedule 2.

The products referred to in items 1 to 3 of Schedule 2 are: milk, skim milk, buttermilk (whether liquid, powdered, concentrated or condensed), casein, whey, whey powder, whey paste and lactose. All of these products are derivatives of mammalian milk. Therefore, although the ordinary meaning of milk can include plant milk (such as soy milk), it is considered that the surrounding words used in the items in the category 'milk products' in Schedule 2, reveal that items 1 to 3 only include mammalian milk products.

Therefore, soy milk powder is not an ingredient that is a kind of milk powder, skim milk powder or buttermilk powder under item 1(a) of Schedule 2 as the word 'milk' in this context, refers to mammalian milk. Further soy milk powder is not covered by any of the other items in Schedule 2. Accordingly, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells soy milk powder.

In this case, 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.

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)(d)
   Division 40
   Schedule 2 clause 1
   Schedule 2 clause 1 table item 1
   Schedule 2 clause 1 table item 1(a)
   Schedule 2 clause 1 table item 2
   Schedule 2 clause 1 table item 3
   Schedule 2 clause 1 table item 4

Case References:
Fox v. Warde
   [1978] VR 362

Other References:
The Macquarie Dictionary 1997, 3rd edition, The Macquarie Library Pty Ltd, New South Wales.

Keywords
Goods & services tax
GST free
GST food
Ingredients for beverages
GST supplies & acquisitions
Taxable supply

Business Line:  Indirect Tax

Date of publication:  15 September 2001

ISSN: 1445-2782