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Ruling

Subject: GST treatment of juice supplied by vending machine and entitlement to input tax credits

Questions

Will the entire sale price of fresh juice dispensed into packaging by your vending machine for sale direct from your vending machine be subject to Goods and Service Tax (GST)?

Is it the case that only the packaging used to dispense the fresh juice from your vending machines will be subject to GST but the juice itself is GST-free?

Are you entitled to claim input tax credits on your acquisitions of packaging which is used to dispense the fresh juice from your vending machine?

Answers

No, the entire sale price will not be subject to GST as your sales direct from your vending machine of fresh juice dispensed into packaging by your vending machine is a GST free supply.

No, both the packaging used to dispense the fresh juice from your vending machines as well as the juice itself is GST-free.

Yes, you are entitled to claim input tax credits on your acquisitions of packaging which is used to dispense the fresh juice from your vending machine.

Relevant facts and circumstances

You are registered for GST.

You carry on an enterprise of supplying fresh juice through your vending machines to customers.

You regularly restock your vending machines.

The packaging is acquired by you from an Australian supplier wholly for use in your enterprise. There is no private use.

The vending machines are placed on premises in many and varied locations.

After a customer has inserted his or her money into the vending machine, fresh juice is dispensed into packaging by the vending machine.

The customer is able to access a window to retrieve the fresh and chilled juice.

No water or other additives are added to the juice.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5

A New Tax System (Goods and Services Tax) Act 1999 Section 11-5

A New Tax System (Goods and Services Tax) Act 1999 Section 11-15

A New Tax System (Goods and Services Tax) Act 1999 Section 11-20

A New Tax System (Goods and Services Tax) Act 1999 Section 11-25

A New Tax System (Goods and Services Tax) Act 1999 Division 38

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 Schedule 2 clause 1 item 12

A New Tax System (Goods and Services Tax) Act 1999 Section 38-5

A New Tax System (Goods and Services Tax) Act 1999 Section 38-6

A New Tax System (Goods and Services Tax) Regulations 1999 Regulation 38-3.01

Reasons for decision

Questions 1 and 2

Taxable supply

GST is payable where you make a taxable supply.

You make a taxable supply where you satisfy the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states:

You make a taxable supply if:

· you make the supply for *consideration; and

· the supply is made in the course or furtherance of an *enterprise that

· you *carry on; and

· the supply is *connected with Australia; and

· 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 that is defined in section 195-1 of the GST Act).

In your case, you will satisfy the conditions of paragraphs 9-5(a) to 9-5(d) of the GST Act. That is, you will make a supply of fresh juice through your vending machines for consideration and in the course or furtherance of the enterprise that you carry on. Additionally, these sales will be connected with Australia, and you are registered for GST.

There are no provisions within the GST Act or any other Act, that make your supply of fresh juice from your vending machines input taxed.

Therefore, what remains to be determined is whether your supply will be GST-free.

GST-Free Food

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). Fresh juice is a beverage for human consumption.

The Australian Taxation Office view is given in Goods and Services Tax Determination GSTD 2002/2 which explains what supplies of fruit and vegetable juices are GST-free. This is accessible from our website.

However, under paragraph 38-3(1)(d) of the GST Act, a beverage is not GST-free if they are not specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2).

Item 12 in Schedule 2 (Item 12) lists non-alcoholic non-carbonated beverages, if they consist of at least 90% of juices of fruits or vegetables by volume.

Your fresh juice is non-alcoholic, non-carbonated and consists of at least 90% of juices of fruits or vegetables by volume. Therefore, the product is covered by Item 12, and the supply is not excluded from being GST-free as paragraph 38-3(1)(d) of the GST Act does not apply.

Under paragraph 38-3(1)(a) of the GST Act, a supply is not GST-free if it is food for consumption on the premises from which it is supplied. This could apply as your vending machines are placed in many and varied locations. However, subsection 38-3(2) of the GST Act states that section 38-3 of the GST Act does not apply to food specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) for the purposes of subsection 38-3(2) of the GST Act.

GST-free beverages supplied from vending machines are covered by regulation 38-3.01 of the GST Regulations.

The effect of regulation 38-3.01 of the GST Regulations is that a supply of a beverage that would otherwise be GST-free due to the operation of Schedule 2, will be GST-free even if it is supplied for consumption on the premises, where the supply is made from a vending machine. Therefore the supply of such food will be GST-free under section 38-2 of the GST Act. Accordingly your supply of fresh juice through your vending machines will remain GST-free under section 38-2 of the GST Act as regulation 38-3.01 of the GST Regulations applies.

Food Packaging-Plastic cups

Subsection 38-6(1) of the GST Act states that a supply of the packaging in which food is supplied, is GST-free if the supply of the food is GST-free. However, subsection 38-6(2) of the GST Act, states that the supply of packaging is only GST-free to the extent that the packaging:

· is necessary for the supply of food; and

· is packaging of a kind in which such food is normally supplied.

The Australian Taxation Office view is given in Goods and Services Tax Determination GSTD 2000/6 which explains when a supply of food packaging will be GST-free under subsection 38-6(1) of the GST Act. This is also accessible from our website.

In this case, the packaging into which the fresh juice is dispensed are considered to be necessary to supply the juice to a customer. Also, it is usual for juice to be supplied in packaging for individual consumption where the juice is freshly squeezed. Therefore, the supply of the packaging in which food is supplied is GST-free as the accompanying fresh juice is GST-free.

Question 3

Creditable acquisition

If you sell GST-free goods or services, you can still claim input tax credits for the GST included in the price of things you purchase to use in your business.

Under section 11-20 of the GST Act, you are entitled to claim input tax credits for any creditable acquisition that you make.

You make a creditable acquisition under section 11-5 of the GST Act if:

· you acquire anything solely or partly for a creditable purpose; and

· the supply of the thing to you is a taxable supply; and

· you provide, or are liable to provide consideration for the supply; and

· you are registered or required to be registered.

Creditable purpose

You acquire a thing for a creditable purpose to the extent that you acquire it in carrying on an enterprise.

However, under subsection 11-15(2) of the GST Act, you do not acquire the thing for a creditable purpose to the extent that:

· the acquisition relates to making supplies that would be input taxed (for example financial supplies and supplies of residential premises); or

· the acquisition is of a private or domestic nature.

In this case, you will acquire packaging to restock your vending machines for the purposes of dispensing the fresh juice to your customers as part of carrying on your enterprise. The packaging is wholly for use in your business with no private usage. As such, paragraph 11-5(a) of the GST Act is satisfied as the acquisitions are solely for a creditable purpose and will be used in carrying on your enterprise to the extent of 100%. Paragraph 11-5(c) of the GST Act will also be satisfied if you provide, or are liable to provide consideration (that is payment) for purchasing the packaging. As you are registered for GST paragraph 11-5(d) of the GST Act is satisfied. Where the supplies to you are taxable supplies, paragraph 11-5(b) of the GST Act will also be satisfied.

Taxable supply to you

In order for a supply to be a taxable supply to you all the requirements of section 9-5 of the GST Act must be met. A supply is a taxable supply under section 9-5 of the GST Act if:

· the supply made by the supplier to you is for consideration; and

· the supply is made in the course or furtherance of an enterprise that the supplier carries on; and

· the supply is connected with Australia; and

· the supplier is 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.

In this case, the supplies of the packaging are made to you by the supplier for consideration, the relevant supplies are purchased from business suppliers in Australia, and the supplies to you will have GST included in their price (which would indicate that the suppliers are registered for GST). Furthermore, there are no provisions in the GST Act which would make the supplies to you GST-free or input taxed. This suggests that the supplies will be taxable supplies to you and that all the requirements of section 9-5 of the GST Act will be satisfied. Therefore, paragraph 11-5(b) of the GST Act will be satisfied as the supplies to you will be taxable supplies.

Entitlement to input tax credits

Accordingly, as all the requirements under section 11-5 of the GST Act will be met your acquisitions will be creditable acquisitions. Therefore, you will be entitled to claim input tax credits under section 11-20 of the GST Act for the creditable acquisitions that you will make. You will be entitled to input tax credits equal to the amount of the GST paid under section 11-25 of the GST Act for the creditable acquisitions used for 100% business use.

Before you claim an input tax credit you must hold a valid tax invoice for creditable acquisitions you make for $82.50 or more. (You can claim input tax credit for creditable acquisitions you make up to $82.50 without holding a tax invoice as long as you keep records that support the claim (for example, cash register dockets or receipts).

For guidance on input tax credits please refer to our Fact Sheet GST credits for business (NAT 3019).