Edited version of private ruling

Authorisation Number: 1011785636301

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 fac 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 supplies

Question 1

Are you making GST-free supplies, under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you supply your particular products

Answer

Yes

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are registered for goods and services tax (GST).

You are a frozen food company that manufactures and distributes fruit products (products) in Australia.

You stated the following:

You began distributing different the products through major supermarkets and independent grocers.

The products are fruit derived products that contain no preservatives, colours or flavours. The products are designed to be blended with liquids.

The products are produced using all natural fruit ingredients which are blended together then frozen, packaged and distributed.

Although the products are primarily made of fruit and fruit concentrates which by their nature contain water, once frozen, the products are in a solid state and are devoid of moisture.

The different types of products come in packages.

The products are sold in the supermarket freezer as food.

We examined a sample of your product that we purchased at a Supermarket.

On examination, we found that the above products were moist even in a frozen state.

Relevant legislative provisions

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 section 38-4

A New Tax System (Goods and Services Tax) Act 1999 paragraph 38-3(1)(a)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 38-3(1)(d)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 38-4(1)(c)

A New Tax System (Goods and Services Tax) Act 1999 Schedule 2

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Summary

You are making GST-free supplies under section 38-2 of the GST Act when you supply the products of different flavours.

Detailed reasoning

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 the supply is not excluded from being GST-free by section 38-3 of the GST Act. 

Food is defined under paragraph 38-4(1)(c) of the GST Act to include ingredients for beverages for human consumption.

However, section 38-3(1)(d) of the GST Act provides that a supply is not GST-free if it satisfies is a supply of a beverage (or an ingredient for beverages), other than a beverage (or ingredient) of a kind specified in the third column of the table in clause1 of Schedule 2 of the GST Act.

It is necessary, therefore, to consider whether your Smoothie Cubes are ingredients for beverages for human consumptions under paragraph 38-4(1)(c) of the GST Act

You said that you considered and classified the products as 'beverages' for GST purposes under items 9 and 10 of the table in Schedule 2 of the GST Act.

Item 9 and 10 of the table in Schedule 2 of the GST Act states:

Item 9 of Schedule 2 of the GST Act

After analysing your product, you came to the conclusion and stated the following:

The products are not distributed in a powder form in sachets, but supplied in a frozen dry state, should not be preclude the conclusion that the requirements in item 9 of the Schedule 2 of the GST Act are not satisfied.

On the above basis we submit that the products fulfil the criteria of item 9 in Schedule 2 of the GST Act.

We purchased a box of the products that was marketed by you and examined them to find whether they satisfied the criteria of item 9 in Schedule 2 of the GST Act.

The meaning of the word 'dry' is not defined in the GST Act. Therefore, it takes the ordinary meaning. The Australian Oxford Dictionary provides the meaning of 'dry'. It states:

1 free from moisture, not wet, esp a with any moisture having evaporated, drained, or been wiped away. On examination of your product, they did not fall into any of the meanings given in the Australian Oxford Dictionary, pertaining to 'dry'. Therefore, they are not considered to be 'dry' and hence item 9 of schedule 2 of the GST Act will not apply in your case.

We are, therefore, required to analyse whether your products will satisfy the requirement under item 10 of Schedule 2 of the GST Act.

Item 10 of Schedule 2 of the GST Act

Item 10 of Schedule 2 of the GST Act lists concentrates for making non alcoholic beverages if the concentrate consists of at least 90% by volume of juices of fruits.

As per the information provided by you, it is considered that the supply of your products contains at least 90% or more by the volume of the juices of fruits.

Therefore, item 10 of Schedule 2 of the GST Act is satisfied. Hence, your supply of of products are concentrates for making non alcoholic beverages and the concentrate consist of at least 90% by volume of juices of fruits. Accordingly you are making GST-free supplies under section 38-2 of the GST Act when you supply your products.