Edited version of private ruling

Authorisation Number: 1011647154233

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: GST and frozen fruit juice

Question

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

Answer

No, the supply of your frozen fruit juice product is not a GST-free supply. It is a taxable supply.

Relevant facts and circumstances

You are registered for goods and services tax (GST). You supply a range of fruit juice products.

You have a frozen juice product for human consumption for sale. The product contains frozen juice. No water or flavouring is added and it does not contain any juice concentrate or other additives. It will be supplied as one serving size units in pillow pack packaging.

Reasons for decision

Detailed reasoning

GST is payable on taxable supplies. Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that 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

(c) the supply is connected with Australia, and

(d) you are registered or required to be registered for GST

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

In your case, the supply of your product will be for consideration and in the course or furtherance of an enterprise that you carry on. Your supplies are connected with Australia and you are registered for GST. Therefore, paragraphs 9-5(a), 9-5(b), 9-5(c) and 9-5(d) of the GST Act will be satisfied.

There are no provisions in the GST Act that would make the supply of your product input taxed.

Therefore, it remains to be determined whether the supply of your product will be

GST-free under Division 38 of the GST Act.

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:

· food for human consumption (whether or not requiring processing or treatment) [(paragraph 38-4(1)(a)]; and

· beverages for human consumption (paragraph 38-4(1)(c) of the GST Act).

This product is supplied frozen and is mainly consumed by customers from its packaging in a frozen state. Therefore, this product is food for human consumption.

Is the product a 'beverage'?

You contend that this product is also a beverage as it may be allowed to defrost and is then consumed in a liquid form.

In classifying your product, we must consider the essential character of the product you are supplying. This means deciding what the goods essentially are, as distinct from merely identifying one of a number of characteristics the goods might have. The approach relies upon deciding what is the basic nature of the goods and involves consideration of what the goods are made of and what they might be used for.

In this case, the essential character of this product is a frozen fruit product. The product is not considered to be a beverage as it is not packaged in a manner that makes it easy to consume as a beverage. Rather, as information on the packaging states, it should be stored frozen and consumed in a frozen state as an ice block. The Tax Office does not accept that this product has the essential characteristics of a beverage.

Although this product is a food for human consumption, under paragraph 38-3(1)(c) of the GST Act, food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1) is not GST-free. Below are listed items 28 to 31 of Schedule 1.

Food that is not GST-free

Item Category Food

Of most relevance to this product are item 29 in the table in Schedule 1 (Item 29) and item 30 in the table in Schedule 1 (Item 30).

Item 29

This item specifies frozen confectionery, frozen yoghurt and frozen fruit products (but not frozen whole fruit). Based on information supplied, this product contains juice supplied in a frozen form. Therefore, your supply of this product is covered by Item 29 of Schedule 1 as a frozen fruit product.

Item 30

This item specifies flavoured ice blocks (whether or not marketed in a frozen state). The term "flavoured iceblock" is not defined in the GST Act.

The Macquarie Dictionary (2001) defines "flavour" to include:

1. taste, especially a characteristic taste, or a noticeable element in the taste, of a thing.

2. a flavouring substance or extract.

3. the characteristic quality of a thing.

In this case, you state that based on industry standards this product is not flavoured as it takes its flavour from natural fruit juice and not by artificial means. However, the definition of flavour does not indicate that the 'flavour' must only be a substance or extract which is added but can also be the characteristic taste of a product. Therefore, it is considered that the definition of flavour will also include a naturally occurring fruit taste as is the case with your product. In addition, we note that you will market this product as an iceblock. Therefore, this product is also covered by Item 30 as a flavoured iceblock (frozen).

Accordingly, this product is excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act.

Therefore, as the supply of your product is not GST-free under Division 38 of the GST Act you are making a taxable supply under section 9-5 of the GST Act when you sell this product.