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Edited version of your private ruling

Authorisation Number: 1012558917992

Ruling

Subject: WET - Product Classification

Question 1

Is your product, manufactured using Process One, considered to be 'grape wine' for the purposes of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act)?

Answer

No.

Question 2

Is your product, manufactured using Process Two, considered to be 'grape wine' for the purposes of the WET Act?

Answer

No.

Relevant facts and circumstances

You are registered for goods and services tax (GST).

You are not registered for wine equalisation tax (WET).

You account for GST on a cash method.

You intend producing a fortified wine alcoholic beverage (your product).

The wine used was produced through the complete or partial fermentation of fresh grapes or products derived solely from fresh grapes.

The wine will be decolourised and deodorised by using (Process One) or followed by (Process Two).

Once your product has undergone either processes it will then be fortified with neutral grape spirit and will have a final alcoholic strength of 21.9%

Your product does not contain any flavours or additives other than the neutral grape spirit added to it.

Relevant legislative provisions

A New Tax System (Wine Equalisation Tax) Act 1999 subdivision 31-A

A New Tax System (Wine Equalisation Tax) Act 1999 subsection 31-1(1)

A New Tax System (Wine Equalisation Tax) Act 1999 subsection 31-1(2)

A New Tax System (Wine Equalisation Tax) Act 1999 section 31-2

A New Tax System (Wine Equalisation Tax) Act 1999 paragraph 31-2(1)(a)

A New Tax System (Wine Equalisation Tax) Act 1999 paragraph 31-2(1)(b)

A New Tax System (Wine Equalisation Tax) Act 1999 subsection 31-2(2)

A New Tax System (Wine Equalisation Tax) Act 1999 section 33-1

A New Tax System (Wine Equalisation Tax) Regulations 2000 Regulation 31-2.01

Excise Tariff Act 1921

Reasons for decision

Question 1

Summary

No, your product, manufactured under Process One is not 'grape wine' for the purposes of the WET Act.

Detailed reasoning

Wine is defined in section 33-1 of the WET Act as having the meaning given by Subdivision 31-A of the WET Act.

Subsection 31-1(1) in Subdivision 31-A of the WET Act states that wine means any of the following:

· Grape wine;

· Grape wine products;

· Fruit or vegetable wines;

· Cider or Perry;

· Mead;

· Sake.

Subsection 31-1 (2) of the WET Act provides that wine does not include beverages that do not contain more than 1.15% by volume of ethyl alcohol.

Section 31-2 of the WET Act defines grape wine as follows:

(1) Grape wine is a beverage that:

(a) is the product of the complete or partial fermentation of fresh
grapes or products derived solely from fresh grapes; and

(b) complies with any requirements of the regulations, made for
the purposes of section 31-8, relating to grape wine.

(2) A beverage does not cease to be the product of the complete or partial
fermentation of fresh grapes or products derived solely from fresh grapes
merely because grape spirit, brandy, or both grape spirit and brandy, have
been added to it.

The regulations referred to in section 31-2 above are the A New Tax System (Wine Equalisation Tax) Regulations 2000. Regulation 31-2.01 relates to grape wine. It states:

Process One

The manufacture of your product under Process One requires grape wine undergoing a process to decolourise/deodorise the wine.

You have advised that once Process One is completed, 'most of the colour and odour is removed'.

The definition of 'grape wine' is silent on the processes (other than fermentation) required to make wine. Taking a narrow interpretation of the provisions, it could be said that as any process (other than fermentation) is not specifically allowed. On a narrow reading of the definition, a beverage produced using carbon filtration would not meet the definition. However, taking into account the context and underlying intention of the relevant provisions, it is considered appropriate that the provision be afforded a broad interpretation.

Therefore, it is acknowledged that some processes other than fermentation may be a necessary part of the traditional grape winemaking process. Such processes include filtration. However, any such process is only accepted to the extent that the finished product retains all the essential characteristics of grape wine such as the flavour and aroma compounds of grape wine.

You have advised that this process results in the removal of 'most of the colour and odour' from the wine.

On the basis that the process used by you results in the wine being stripped of most of its colour and odour, it cannot be said that product that results from the Process One retains 'all the essential characteristics of the grape wine'.

As such, your product, manufactured under Process One, is not classified as a grape wine under section 31-2 of the WET Act. Instead, it may be classified as an 'other excisable beverage' under the Excise Tariff Act 1921 and subject to excise duty.

Question 2

Summary

No, your product, manufactured using Process Two, is not considered to be 'grape wine' for the purposes of the WET Act.

Detailed reasoning

Process Two incorporates Process One. On the basis that your product resulting from Process One is not grape wine, it follows that subjecting a product that is not grape wine to any further process will not result in grape wine.

However, for the sake of completeness, we have gone on to consider whether a product that is manufactured by subjecting grape wine to a deodorisation and decolourisation process using only Process Two, would be considered to be grape wine for the purposes of the WET Act.

The Excise Guidelines for the Alcohol Industry (Guidelines), which set out the Commissioner's view of the operation of the excise laws as they apply to the alcohol industry, provide that 'spinning cone columns' are treated as a form of still.

A still is an apparatus that uses vaporisation and condensation to separate component substances from liquid mixtures, usually by applying heat.

This process is a form of distillation where liquid mixtures are subjected to low temperature vacuum steam distillation to gently extract chemicals etc affecting the taste of the end product. As a result of grape wine being subjected to this process it is no-longer considered to be a product derived solely from a complete or partial fermentation of grapes but rather it becomes a product of distillation.

As such, the product that results from subjecting grape wine to Process Two is not considered to be grape wine for the purposes of section 31-2 of the WET Act.

Under this process, any resulting product will be considered to be an 'other excisable beverage' under the Excise Tariff Act 1921 and subject to excise duty.

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