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Ruling

Subject: GST and fruit juice tubes

Question 1

Are the fruit juice tubes GST-free because they are a "food" and are not considered taxable because of items 28-31 (items 28-31), in the table in clause 1 of schedule 1 (Schedule 1), to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) ?

Advice/Answers

No, the fruit juice tubes are not GST-free pursuant to item 30 in Schedule 1 to the GST Act.

Relevant facts

You registered for GST.

This product is principally comprised of fruit juice and natural flavours.

This product is sold in supermarkets with other products such as fruit puree snack packs and fruit in syrup or jelly. These latter products are classified as GST-free.

The fruit juice tubes are best consumed in a frozen state.

The instructions on the product recommend that the consumer freeze the product prior to consumption.

The fruit juice tubes are not sold frozen and are not found in the freezer section of the supermarket.

Reasons for decision

Section 9-5 of the GST Act outlines when a supply is considered to be a taxable supply. A supply is not a taxable supply if it is GST-free.

A supply of food is GST-free under section 38-2 of the GST Act if it satisfies the definition of food in section 38-4 of the GST Act and it does not come within any of the exclusions listed in section 38-3 of the GST Act.

Subsection 38-4(1) of the GST Act defines food to include, amongst other things, these, or any combination of these:

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

· ingredients for food for human consumption;

· beverages for human consumption; and

· goods to be mixed with or added to food for human consumption (including condiments, spices, seasonings, sweetening agents or flavourings).

You have advised that these products that you now produce are fruit juice tubes (items), (containing XX% juice), that are best consumed frozen.

Once it has been determined that an item is food, further consideration needs to be given to section 38-3 of the GST Act, which applies to make certain foods subject to GST.

Paragraph 38-3(1)(c) of the GST Act provides that a supply of food is not GST-free under section 38-2 of the GST Act if it includes a supply of a food of a kind specified in clause 1 of schedule 1 to the GST Act (Schedule 1).

Your contentions

You state that as the product is sold in an unfrozen state and designed to be frozen before consumption and at the time of consumption could be described as similar to one of the frozen foods listed in items 28 - 30 in Schedule 1. You also contend that this is irrelevant as the correct time and only time at which the classification of the product is relevant is at the time of sale not the time of consumption.

You further state that in determining whether the product is similar to those listed in items 28 - 30 in Schedule 1 that the "GST food guide" states that "sorbet" is a taxable product. You contend that the food guide is referring to frozen sorbet products which are in a frozen state at the time of sale and consumption. You also acknowledge that if the product was sold in a frozen state and available in the freezer section that the product is more likely to be regarded as a taxable under item 31 in Schedule 1.

You contend that as the product does not fit within any of the items listed in clause 1 of Schedule 1 that any supply of the product should be treated as a GST-free supply.

The question is to determine whether the items are a food of a kind listed in Schedule 1 of the GST Act and specifically items 28 - 31 of Schedule 1.

Item 28

This item operates to tax "ice-cream, ice-cream cakes, ice-creams and ice-cream substitutes". The term "ice-cream" is not defined in the GST Act.

The Macquarie Dictionary defines ice-cream as 'frozen food made of cream or milk, sweetened and flavoured'.

Item 28 does not apply to the items as they are not frozen food made of cream or milk.

Item 29

This item operates to tax "frozen confectionary, frozen yoghurt, and frozen fruit products (but not frozen whole fruit)".

As the product is not supplied in a frozen state, it is not taxable pursuant to item 29 in the Schedule.

Item 30

This item operates to tax 'flavoured iceblocks (whether or not they are marketed in a frozen state)'.

You acknowledge that as the item is sold when it is not in a frozen state and is designed to be frozen before consumption that it could be described as being similar to one of the frozen foods listed in items 28-30 in the Schedule. However, you contend that this is irrelevant as the correct time and only time at which the classification of the product is relevant is at the time of sale not the time of consumption.

Item 30 in the Schedule provides guidance in respect of the classification of wherein in states that food that is not GST-free includes flavoured iceblocks "(whether or not marketed in a frozen state)".

You are marketing the items as best consumed in a frozen state and the instructions recommend that the consumer freeze the product prior to consumption. The items are packaged in tubes in the manner of traditional home iceblock products.

The items are therefore considered to be taxable pursuant to item 30 in the Schedule.

Item 31

This item operates to tax 'any food similar to food listed in items 28 - 30'.

As the items are taxable under item 30 in the Schedule, it is not necessary to consider if the product is taxable under this item.