ATO Interpretative Decision

ATO ID 2002/990

Goods and Services Tax

GST and ready-to-drink iced tea
FOI 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 supplies iced tea that is marketed as ready-to-drink?

Decision

No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies iced tea that is marketed as ready-to-drink. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts

The entity is a food supplier. The entity supplies iced tea that is marketed as ready-to-drink.

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 by section 38-3 of the GST Act.

The meaning of food in section 38-4 of the GST Act includes beverages for human consumption (paragraph 38-4(1)(c) of the GST Act). The ready-to-drink iced tea is a beverage for human consumption and comes within the meaning 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 GST-free only if it is a beverage of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2).

The only item in Schedule 2 that is relevant in determining the GST status of ready-to-drink iced tea is item 5 of Schedule 2 (Item 5). Item 5 lists tea (including herbal tea, fruit tea, ginseng tea and other similar beverage preparations), coffee and coffee essence, chicory and chicory essence, and malt as being GST-free.

However, clause 2 of Schedule 2 of the GST Act provides that none of the items in the table relating to the category of tea, coffee etc. include any beverage that is marketed in a ready-to-drink form. The entity is supplying iced tea that is marketed as ready-to-drink. Therefore, the iced tea is excluded from being GST-free by clause 2 of Schedule 2.

Accordingly, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies iced tea that is marketed as ready-to-drink.

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 ready-to-drink iced tea.

Date of decision: 2 May 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)(c)
   Division 40
   Schedule 2 clause 1
   Schedule 2 clause 1 table item 5
   Schedule 2 clause 2

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

Business Line: GST

Date of publication: 30 October 2002

ISSN: 1445-2782

history

	Date:	Version:
You are here →	2 May 2002	Original statement
	28 October 2005	Archived

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