Edited version of your written advice

Authorisation Number: 1012814625111

Ruling

Subject: GST and tree water

Question 1

Are supplies of Tree Water GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No.

Relevant facts and circumstances

You are importing Tree Water; your first shipment was treated as a taxable importation.

Tree Water is harvested from the sap of trees and is drinkable instantly; it is also bottled and packed commercially like other juices and plant waters.

Tree water is tapped from the tree. Tree Water flows through plastic pipes from the tree into a rough pre-filter. It is then transferred by cistern truck to the treatment centre where it is emptied into refrigerated stainless steel tank and sterilized before packaging.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 13-10

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

Reasons for decision

Summary

Supplies of Tree water are not GST-free under section 38-2 of the GST Act.

Detailed reasoning

Section 13-10 of the GST Act notes that:

An importation is a non-taxable importation if:

(a)     it is a non-taxable importation under Part 3-2; or

(b)     it would have been a supply that was *GST-free or *input taxed if it had been a supply.

Paragraph (b) above refers to the GST-free provisions of the GST Act and directs that the importation in question should be assessed as if it had been a supply.

Division 38 of the GST Act sets out supplies that are GST-free. 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 from being GST-free by section 38-3 of the GST Act.

Food is defined in section 38-4 of the GST Act to include beverages for human consumption (paragraph 38-4(1)(c) of the GST Act). Tree Water is supplied as a beverage for human consumption.

Therefore, Tree water comes within the meaning of food contained in section 38-4 of the GST Act as a beverage for human consumption.

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 of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). Schedule 2 states:

*Beverages specified in the third column of the table are GST-free.

Beverages that are GST-free
Item	Category	Beverages
1	Milk products	any of the following products: (a) milk, skim milk or buttermilk (whether liquid, powdered, concentrated or condensed); (b) casein; (c) whey, whey powder or whey paste
2		*beverages consisting of products referred to in item 1 (or a combination of those products), to the extent of at least 95%, but not including flavoured beverages
3		lactose
4	Soy milk and rice milk	*beverages consisting principally of soy milk or rice milk, but not including flavoured beverages
5	Tea, coffee etc.	tea (including herbal tea, fruit tea, ginseng tea and other similar *beverage preparations), coffee and coffee essence, chicory and chicory essence, and malt
6		malt extract, if it is marketed principally for drinking purposes
7		preparations for drinking purposes that are marketed principally as tea preparations, coffee preparations, or preparations for malted *beverages
8		preparations marketed principally as substitutes for preparations covered by item 6 or 7
9		dry preparations marketed for the purpose of flavouring milk
10	Fruit and vegetable juices	concentrates for making non-alcoholic *beverages, if the concentrates consist of at least 90% by volume of juices of fruits
11		non-alcoholic carbonated *beverages, if they consist wholly of juices of fruits or vegetables
12		non-alcoholic non-carbonated *beverages, if they consist of at least 90% by volume of juices of fruits or vegetables
13	Beverages for infants or invalids	*beverages, and ingredients for beverages, of a kind marketed principally as *food for infants or invalids
14	Water	natural water, non-carbonated and without any other additives

2 Tea, coffee etc.

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.

3 Fruit and vegetable juices

For the purposes of items 11 and 12 in the table, herbage is treated as vegetables.

Of most relevance to Tree Water is item 12 of Schedule 2 (Item 12), which provides that non-alcoholic non-carbonated beverages, that consist of at least 90% by volume of juices of fruits or vegetables, are GST-free. Tree sap is not the fruit or seeds of the tree. Accordingly, Tree Water is not considered to be the juice of a fruit.

In addition, Tree water does not fall within the coverage of any of the other items in Schedule 2. We spoke briefly about 'herbage' on Friday 22 May 2015. Note that clause 3 of Schedule 2 states that 'herbage' is treated as vegetables for the purposes of Item 12.

Herbage is not defined in the GST law and so takes its ordinary meaning. Herbage is defined in the Macquarie Dictionary Online (as at 26 May 2015) as:

noun 1.  non-woody vegetation.

2.  the succulent parts (leaves and stems) of herbaceous plants.

3.  vegetation grazed by animals; pasturage.

[Middle English, from French, from herbe grass. See herb]

Trees that are harvested of their sap do not meet the definition of herbage and therefore clause 3 does not act to include Tree Water under the coverage of Item 12.

Supplies of Tree Water are taxable supplies.

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