ATO Interpretative Decision
ATO ID 2001/780
Goods and Services Tax
GST and apple ciderFOI status: may be released
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 apple cider?
Decision
No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells apple cider. 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 selling apple cider.
The cider is produced by fermenting crushed apples in oak barrels.
The cider has an alcohol content of 7½ per cent.
The entity is registered for goods and services tax (GST). The supply satisfies the 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 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.
The term 'food' is defined in paragraph 38-4(1)(c) of the GST Act to include 'beverages for human consumption'. It is considered that apple cider is a beverage for human consumption. Therefore, the apple cider satisfies the definition of food contained in paragraph 38-4(1)(c) of the GST Act.
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 to the GST Act (Schedule 2).
The items from Schedule 2 that are of most relevance to apple cider are items 10, 11 and 12 from the category 'Fruit and vegetable juices'.
The apple cider is an alcoholic beverage that acquires its alcohol content through human intervention (that is by fermentation in an oak cask) - see JMB Beverages Pty Ltd v. FC of T 2009 ATC 20-112. As items 10, 11 and 12 in Schedule 2 all specifically relate to non-alcoholic beverages, they do not cover the apple cider in question. Therefore, the apple cider is excluded from being GST-free under paragraph 38-3(1)(d) 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 any of the other provisions 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 sells apple cider.
Date of decision: 26 June 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)
section 38-4
paragraph 38-4(1)(c)
Division 40
Schedule 2 clause 1
Schedule 2 clause 1 table item 10
Schedule 2 clause 1 table item 11
Schedule 2 clause 1 table item 12
Case References:
JMB Beverages Pty Ltd v FC of T
2009 ATC 20-112
ATO ID 2001/781
Keywords
Goods & services tax
GST-free
GST food
GST beverages
ISSN: 1445-2782
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