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Edited version of your written advice

Authorisation Number: 1012720491790

Ruling

Subject: Fruit powder

Question 1

Is the supply of your fruit powder GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No

This ruling applies for the following periods:

The scheme has commenced

Relevant facts and circumstances

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

• You will purchase fruit powder (the product) overseas and import the product to Australia for sale.

• The product contains 100% fruit powder.

• The product provides various health benefits and is marketed for its health benefits.

• The product label and information collected from the manufacturer of the product states that the product can be used as in ingredient in both beverages and food.

• The product is not intended to diagnose, treat, cure or prevent any disease.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 38-2

A New Tax System (Goods and Services Tax) Act 1999 Section 38-3

A New Tax System (Goods and Services Tax) Act 1999 Section 38-4

A New Tax System (Goods and Services Tax) Act 1999 Schedule 1

A New Tax System (Goods and Services Tax) Act 1999 Schedule 2

Reasons for decision

A supply of food is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act.

Definition of food

Food is defined in section 38-4 of the GST Act to include, among other things, ingredients for beverages for human consumption and ingredients for food for human consumption.

The product contains 100% fruit powder and provides various health benefits. It is intended to be added to various beverages and also used in various foods. The product is not intended to diagnose, treat, cure or prevent any disease.

The product therefore satisfies the definition of food in section 38-4 of the GST Act, as it is considered to be an ingredient for beverages for human consumption and an ingredient for food for human consumption.

Food excluded from being GST-free

Section 38-3 of the GST Act refers to Schedule 1 and Schedule 2 of the GST Act. Schedule 1 to the GST Act lists types of foods that are excluded from being GST-free, whereas Schedule 2 to the GST Act lists beverages (or ingredients for beverages) that are GST-free.

In instances where a product has a dual purpose, it is necessary to see how the product is marketed to determine its GST status. In this case, the product is predominantly marketed as an ingredient for beverages. This is because the initial marketing of the product refers to using the product in this manner, both on the product label and on the manufacturer's website. This therefore is the principal use of the product.

Although the product's principle use is as an ingredient for beverages, there is no item listed in Schedule 2 that is of relevance to this product. Therefore, the product is not an ingredient for a beverage of a kind specified in Schedule 2.

Accordingly, paragraph 38-3(1)(d) of the GST Act excludes the supply of the product from being GST-free. Furthermore, the supply is not GST-free under any other provisions in Division 38 of the GST Act

As the supply of the product is not GST-free under section 38-2 of the GST Act, the supply of the product by you is therefore a taxable supply and you will need to account for GST accordingly.

Additionally the importation of the product is a taxable importation under paragraph 13-10(b) of the GST Act.

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