Edited version of private ruling

Authorisation Number: 1011620272892

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Ruling

Subject: GST and juice drink

Issue

Question

Is the supply of your juice product a GST-free supply?

Advice/Answers

No

Relevant facts

You are not registered for goods and services tax (GST).

You produce non-alcoholic juice drinks.

The following is a list of the ingredients that are used to manufacture your juice:

· Ascorbic acid

· Flavour

· Vegetable and fruit juice, and

· Reconstituted juice/water

Reasons for decision

Issue

Question

Is the supply of your juice product a GST-free supply?

Summary

Your supply of juice product is not a GST-free supply. The ATO holds the view that your juice product which includes ascorbic acid do not consist wholly of juices of fruits or vegetables.

Detailed reasoning

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 it satisfies the definition of food in section 38-4 of the GST Act and is not excluded by section 38-3 of the GST Act.

The term food is defined in subsection 38-4(1) of the GST Act. Food includes any of the following, or any combination of any of these:

(a) food for human consumption (whether or not requiring processing or treatment);

(b) ingredients for food for human consumption;

(c) beverages for human consumption;

(d) ingredients for beverages for human consumption.

Your carbonated juice product is a beverage for human consumption and satisfies paragraph 38-4(1)(c) of the GST Act.

However, under paragraph 38-3(1)(d) of the GST Act, a beverage other than a beverage of a kind that is specified in the third column in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2), is not GST-free. That is, the beverage must fall under Schedule 2 to be GST-free.

Item 11 in Schedule 2 (Item 11) is relevant to your carbonated juice product. Item 11 specifies 'non-alcoholic carbonated *beverages, if they consist wholly of juices of fruits or vegetables'.

* Asterisked terms are defined under section 195-1 of the GST Act.

Your carbonated juice product is a non-alcoholic carbonated beverage. We now need to consider whether it consists wholly of juices of fruits or vegetables.

The Australian Taxation Office is of the view that wholly means 100%. This is consistent with the view expressed by Gzell J in P & N Beverages Australia Pty Ltd v FC of T (2007) ATC 4481.

37. The concession by P & N that the word "wholly" meant 100% was a proper one. Items 10 and 12 in the table to cl 1 in Sch 2 of A New Tax System (Goods and Services Tax) Act 1999 (Cth) are, respectively, concentrates for making non-alcoholic beverages if the concentrates consist of at least 90% by volume of juices of fruits, and non-alcoholic non-carbonated beverages if they consist of at least 90% by volume of juices of fruits or vegetables. In that context, "wholly" must, in my view, mean 100%.

We consider that the addition of any substance that is listed as a food additive in the Australian New Zealand Food Standards (ANZFS) will prevent a product from consisting wholly of juices of fruits or vegetables.

This is because the ANZFS defines a food additive as:

any substance not normally consumed as food in itself and not normally as an ingredient for food, but which is intentionally added to a food to achieve one or more technological functions specified in Schedule 5.

To satisfy Item 11, beverages must consist wholly of the juices of fruits or vegetables, except for carbon dioxide; therefore your carbonated juice product does not fall under Item 11. There are no other items in Schedule 2 that are applicable to your carbonated juice product.

We conclude that the supply of your juice product is not a GST-free supply.