EDITED VERSION OF GST PRIVATE RULING

Authorisation Number: 34371

SUBJECT:

GST and liquid fruit concentrate

QUESTIONS AT ISSUE:

1. Is the importation of the liquid fruit concentrate subject to goods and services tax (GST)?

2. Is the sale of the liquid fruit concentrate GST-free?

FACTS:

• You import and sell a liquid fruit concentrate.

• The liquid fruit concentrate comes in different fruit flavours. The liquid fruit concentrate contains less than 90% by volume of juices of fruit.

• In addition, the liquid fruit concentrates contain other flavouring ingredients.

• The liquid fruit concentrate is used in the preparation of fruit drinks.

• The liquid fruit concentrate is blended with water and ice and needs to be reconstituted and diluted to consume.

• You are registered for GST.

DECISION:

1. Yes, the importation of the liquid fruit concentrate is subject to GST.

2. No, the sale of the liquid fruit concentrate is not GST-free. It is subject to GST.

REASONS FOR DECISION:

1. GST is payable on all taxable importation of goods into Australia.

Under section 13-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), an entity makes a taxable importation if:

• it imports goods, and

• the goods are entered for home consumption within the meaning of the Customs Act 1901.

However, an importation is not a taxable importation to the extent that it is a non-taxable importation.

Under section 13-10 of the GST Act, an importation is a non-taxable importation if:

• it is a non-taxable importation under Part 3-2, or

• it would have been a supply that was GST-free or input taxed if it had been a supply.

Part 3-2 is part of the GST legislation that relies on the Customs Tariff Act 1995 to determine whether an importation is taxable or not. The Customs Tariff Act 1995 is administered by the Australian Customs Service (Customs).

You have provided no evidence from Customs to support the fact that your imports of the liquid fruit concentrates are non-taxable importations. It remains to be determined if, had it been a supply, it would have been GST-free or input taxed.

There are no provisions within the GST legislation under which the supply of the liquid fruit concentrate is input taxed. We shall, therefore, consider any provisions under which it may be GST-free.

Under section 38-2 of the GST Act, a supply of food is GST-free.

Food is defined in section 38-4 of the GST Act to include ingredients for beverages for human consumption.

However, in order for the ingredients for beverages to be GST-free, they must be specifically included in Schedule 2 to the GST Act.

In your case, the issue is whether the liquid fruit concentrate is an ingredient of a kind specified in Schedule 2 to the GST Act.

The category of relevance to this case is 'fruit and vegetable juices'. Concentrates for making non-alcoholic beverages, if the concentrates consists of at least 90% by volume of juices of fruit, are specifically included as GST-free in item 10 in the table in clause 1 of Schedule 2 to the GST Act (Item 10).

Item 10 in the GST Act requires a concentrate to satisfy three tests before it will be classified as GST-free. These are:

• the concentrate must be used for making non-alcoholic beverages

• the concentrate must comprise juices of fruits, and

• the concentrate must be at least 90% by volume of juices of fruit.

These tests do not require consideration to be given to the degree of concentration of the fruit juice contained in the product.

Based on the information that you have provided, the liquid fruit concentrate is used for making non-alcoholic beverages and contains juices of fruits. As such, in order to determine whether the concentrate falls within Item 10, it is necessary to consider whether the product contains 90% by volume of juices of fruits. For this requirement to be satisfied, when the contents of the package are examined, the concentrated fruit juice generally makes up more than 90% by volume of the contents of the package in which they are supplied.

As per the facts provided, all the liquid fruit concentrates that you import and sell contain less than 90% by volume of juices of fruit. Hence, they do not fall within the scope of Item 10. As such, the supply of the liquid fruit concentrates is not a GST-free supply under section 38-2 of the GST Act.

There are no other provisions of the GST legislation under which liquid fruit concentrate may be GST-free.

The importation of liquid fruit concentrate is not a non-taxable importation as it would not have been a supply that was GST-free or input taxed if it had been a supply.

As such, you are making a taxable importation under section 13-5 of the GST Act when you import liquid fruit concentrate. Therefore, GST is payable on the importation of liquid fruit concentrate.

2. The sale of liquid fruit concentrate is subject to GST if it is a taxable supply.

Section 9-5 of the GST Act states:

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and

(c) the supply is *connected with Australia; and

(d) you are *registered, or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

* denotes a term defined in section 195-1 of the GST Act.

In your case, you will be selling the liquid fruit concentrate for consideration, the sale is connected with Australia and you are registered. In addition, as outlined in '1' above, the supply of the liquid fruit concentrate is not GST-free or input taxed. Therefore, you are making a taxable supply. Hence, the sale of the liquid fruit concentrate is subject to GST.

Please note: importers can apply to defer GST by applying to the Tax Office under the Deferred GST Scheme. For details on the scheme, you can call 1300 130 915.

Disclaimer

The Register of Private Binding Advice is published as a public record of the binding advice issued by the ATO. Each piece of advice is based on a specific set of circumstances advised to the ATO and the law in force at the time of the advice, and is considered binding only in respect of the person/s or entity/ies on whose behalf the advice was sought. The Register is a historical record of advice provided, and is not updated to reflect changes in the law, withdrawal of advice or any other change in circumstance. Each piece of advice has been edited to avoid disclosing the identity of the person or entity on whose behalf advice was sought and published advice may therefore not disclose all the relevant facts or circumstances on which the advice was based. For these reasons, advice published in this Register cannot be relied upon as precedent for any other person or entity.