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Edited version of your private ruling
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Ruling
Subject: Fruit drink
Question 1
Is the supply of the fruit drink GST-free?
Decision 1
Yes
Question 2
If yes, is the importation of the fruit drink a taxable importation under section 13-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Decision 2
No
Relevant facts:
· You are registered for goods and services tax (GST).
· You carry on an enterprise of importing fruit drink for sale.
· The fruit drink contains juices extracted from fruits.
· The fruit drink is non-alcoholic and non-carbonated.
· The fruit drink is a liquid packed in a bottle.
· The packaging label advises consumer to shake well before drinking the juice.
· The fruit drink is described as a drink for nourishment and does not claim to have any therapeutic qualities.
· The fruit juices contain more than 90% by volume of reconstituted juices of fruits and the remaining part of (less than 10% by volume) is "added water".
· The fruit drink is manufactured by crushing the fruit for its juices and it contains fruit pulp.
· The juice is made into concentrate and then reconstituted to its original pure juice form.
Reasons for decisions
1. Is your supply of the fruit drink GST-free?
A supply of food is GST-free under section 38-2 of the GST Act, providing it does not fall within any of the exclusions listed in section 38-3 of the GST Act.
Food is defined in subsection 38-4(1) of the GST Act to include, among other things, beverages and ingredients for beverages for human consumption.
You have advised that the product is a fruit drink containing juices extracted from fruits. We consider that the fruit drink satisfies the definition of food as it is promoted as a fruit drink that provides nourishment and nutritional benefits (paragraph 38-4(1)(c) of the GST Act). The fruit juice does not contain any ingredients that are registered or listed medicines.
Beverages specified in Schedule 2
Paragraph 38-3(1)(d) of the GST Act provides that a supply of a beverage or an ingredient for a beverage is not GST-free under subsection 38-2 of the GST Act, unless it is of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2).
Items 10, 11 and 12 in Schedule 2 (under the category of fruit and vegetable juices) are relevant items in relation to the fruit drink. These items list beverages that are GST-free. Item 10 in Schedule 2 (Item 10) lists concentrates for making non-alcoholic beverages, if the concentrates consist of at least 90% by volume of juices of fruits as being GST-free. Item 11 in Schedule 2 (item 11) provides that non-alcoholic carbonated beverages that consist wholly of juices of fruits or vegetables are GST-free. We do not consider that the fruit drink is a beverage of a kind listed under items 10 and 11. In particular, the product is not a concentrate for making non-alcoholic beverages under item 10, because the product is intended to be consumed in its current state. The product is also not a beverage made of wholly fruit juice as the fruit drink has "added water" (7% by volume) added to the fruit drink during the manufacturing process, and therefore is not GST-free under Item 11.
Item 12 in Schedule 2 (item 12) lists non-alcoholic non-carbonated beverages if they consist of a least 90% by volume of juices of fruits or vegetables as being beverages that are GST-free.
You have advised that the drink is juices extracted from fruits and it contains more than 90% (by volume) of reconstituted juices of fruits. After reconstitution, the juices are brought back to their original form. Additional water (about 7% by volume) is added to dilute the juices.
Therefore the fruit drink is a beverage of a kind specified in item 12 and is a beverage that is not excluded from being GST free by section 38-3 of the GST Act. The supply of the fruit drink is GST-free under section 38-2 of the GST Act.
2. Is the importation of the fruit drink a non-taxable importation?
Under section 13-5 of the GST Act, an entity makes a taxable importation when it imports goods and enters them for home consumption. However, the importation is not taxable to the extent that it is a non-taxable importation.
The meaning of non-taxable importation is provided in section 13-10 of the GST Act. This provides that an importation is a non-taxable importation if it would have been a GST-free supply had it been a supply.
As a supply of the fruit drink is GST-free under section 38-2 of the GST Act, the importation of the fruit drink will not be a taxable importation and GST will not be payable.
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