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Edited version of private ruling
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Ruling
Subject: GST and drinks
Question
Is the supply of a particular beverage a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No.
A supply of a particular beverage is not a GST-free supply under section 38-2 of the GST Act.
Relevant facts and circumstances
These beverages are sold from retail outlets.
The ingredients for the beverages consist of natural fruits, milk and ice which are all in themselves individually GST-free.
These beverages are non-alcoholic and non-carbonated and are made exactly the same way a natural fruit juice or vegetable juice is made by retail outlets.
You provided percentages of the ingredients.
Summary
A supply of a particular beverage is not a GST-free supply of food because the beverage is not a beverage which is listed in Schedule 2 to the GST Act as a beverage that is GST-free.
Detailed reasoning
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:
(1) (c) beverages for human consumption
Your beverages are beverages for human consumption. However, under paragraph 38-3(1) (d) of the GST Act, beverages are only GST-free if they are specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2).
Your beverages are made up of various ingredients including fruit and juice, milk, and ice. They have less than 90% by volume of the juices of fruits or vegetables.
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.
The beverages that you supply are non-alcoholic and non-carbonated. However, they do not consist of at least 90 per cent by volume of the juices of fruits. Therefore, your beverages are not covered by Item 12. Accordingly, you are not making a GST-free supply under section 38-2 of the GST Act when supplying your beverages.
In addition, item 2 of Schedule 2 to the GST Act lists beverages consisting of products referred to in item 1 (milk products) of Schedule 2 (or a combination of those products), to the extent of at least 95% but not including flavoured beverages as being beverages that are GST-free.
Accordingly, because the beverages that you supply contain milk which is a product referred to in item 1 of Schedule 2 of the GST Act, but not to the extent of 95%, (because the fruit and fruit juice and other ingredients take up at least 55% of the volume of each beverage) and each beverage also contains flavouring, your supply of a beverage cannot be GST-free under item 2 of Schedule 2 to the GST Act.
Since the beverages are not beverages which are listed in Schedule 2 to the GST Act, their supply will be not GST-free.