Edited version of your written advice

Authorisation Number: 1011988512882

NOTICE

This private ruling was revised following issue. This edited version has therefore been replaced with the edited version of the private ruling with the authorisation number of 1051195908972.

Ruling

Subject: Syrups

Question 1

Is the supply of the syrup GST-free?

Answer

See reasons for decision

Relevant facts:

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

You supply syrups to food retail outlets.

The label on the syrup A packaging indicates that they are for flavouring beverages and food.

The label on the syrup B packaging indicates that they are for flavouring beverages only.

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 Paragraph 38-3(1)(c).

A New Tax System (Goods and Services Tax) Act 1999 Section 38-4

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-4(1)(a).

A New Tax System (Goods and Services Tax) Act 1999 Schedule 1

A New Tax System (Goods and Services Tax) Act 1999 section 9-80

Reasons for decisions

Summary

The A syrup is used for flavouring beverages and added to food such as ice-cream or desserts. Therefore it is GST-free under section 38-2 of the GST Act because it can be used a condiment, to be added or mixed food for human consumption.

The B syrup with the exception of the B1 flavour syrup are excluded from being GST-free under paragraph 38-3(1)(d) of the GST Act. The B1 flavour syrup is GST-free under section 38-2 of the GST Act because it can be used a condiment, to be added or mixed food for human consumption.

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 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 subsection 38-4(1) of the GST Act to include ingredients for food for human consumption (paragraph 38-4(1)(b) of the GST Act), ingredients for beverages for human consumption (paragraph 38-4(1)(d) of the GST Act) and goods to be mixed with or added to food for human consumption (paragraph 38-4(1)(e) of the GST Act).

The Australian Taxation Office (ATO) provided an explanation of goods to be mixed with or added to food for human consumption under paragraph 38-4(1)(e) of the GST Act) in Issue 11 of the Food Industry -Issue Register (Food Register). It provides that the products included in paragraph 38-4(1)(e) of the GST Act include:

● condiments (for example, tomato sauce, jam, chutney)

● spices (for example, pepper, cinnamon, cloves)

● seasonings

● sweetening agents

● flavourings (for example, vanilla essence)

The products that satisfy paragraph 38-4(1)(e) of the GST Act are used for the purpose of adding to the taste or flavour of finished foods and are not products that are used in the manufacturing process.

The flavouring syrups satisfy the definition of food under section 38-4 of the GST Act as they could be considered as flavouring ingredients for beverage. In addition the A syrup could also be used for flavouring by mixing with or added to ice cream or custard.

GST status

Under paragraph 38-3(1)(d) of the GST Act, a beverage (or ingredients for beverages) will only be GST-free if they are of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2).

The GST status of foods for human consumption is outlined in the ATO public ruling "Detailed Food List" (Food list). We enclose a copy for your reference. The details on flavouring syrups are as follows:

Therefore where the syrup is used only to flavour beverages, it will be excluded from being GST-free under paragraph 38-3(1)(d) of the GST Act as it is not beverage or ingredients for beverages of a kind specified in Schedule 2.

However, if the syrups are also used for flavouring food for human consumption, it is GST-free under section 38-2 of the GST Act as they satisfy paragraph 38-4(1)(e) of the GST as condiments for adding or mixing to food for human consumption. The syrups are added for the taste or flavour of finished foods and are not excluded from being GST-free by section 38-3 of the GST Act.

Determining use of the syrup

Example 3 in Issue 1 of the Food Register outlines some guidelines to help us determine the use of a product. Its states:

…In determining whether a supply is a supply of GST-free food, it is not only the physical characteristics of the product that are important but also the nature of the supply.

Some of the ways in which a dual-purpose food product could be considered to be differentiated for non-food use are:

● designation as something other than food

● pre-delivery storage in conditions or containers that are unsuitable for food

● packaging in a non-food type of package or container

● labelling, invoicing or marketing as a non-food product

● delivery in a manner unsuitable for food.

Therefore in this case, we rely on the labelling and marketing of the flavouring syrup. Where the label promotes the product (in the serving suggestions) as flavouring syrup for beverages only, we consider the syrup is only use for flavouring beverages. The syrups are ingredients for beverages and are therefore excluded from being GST-free under paragraph 38-3(1)(d) of the GST Act.

However, if the labels promote the product (in the serving suggestions) for flavouring beverages and as well as condiments for food such as ice-cream, desserts, etc., we consider the product to have multiple uses. If one of the usages falls under paragraph 38-4(1) (e) of the GST Act, the product will be GST-free under section 38-2 of the GST Act. We consider the syrups are added for the taste or flavour of the finished foods and are not excluded from being GST-free by section 38-3 of the GST Act.

A syrup

The label describes the A syrup as quality flavoured syrup that could be used for flavouring coffee, soda water or added to your ice cream.

Ice cream is food of a kind listed (under item 28) in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). In this case the A Syrup supplier has intended that the A Syrup could be used as an add-on to the ice cream for flavour. The A syrup can be used as a condiment for ice-cream under paragraph 38-4(1)(e) of the GST Act and the supply is therefore GST-free under section 38-2 of the GST Act.

B syrup

The label on the B Syrup (in the serving suggestions) indicates that the syrup is used only for flavouring beverages such as coffee and milkshakes. Other than the B1 syrup, there is no evidence on the labels or the supplier's websites to indicate that of the B syrup is marketed for use as a condiment.

According to the label for the B1 flavour syrup, the syrup could be used for mixing with food such as dessert food. Therefore the supply of the B1 flavour syrup is GST-free under section 38-2 as it could be used as a condiment and is not excluded from being GST-free by section 38-3 of the GST Act.

With the exception of the B1 flavour syrup, the other B syrups are not being excluded from being GST-free under paragraph 38-3(1)(d) of the GST Act.

However you have advised that your supplier has agreed to add 'preparation suggestions' labels for the other B syrups. The preparation suggestions include adding it to coffee as a coffee flavouring, adding the syrup to ice cream and cold milk as a flavouring for milk shakes and thick shakes, and mixing it with dessert food as a dessert flavouring.

The addition of these labels will confirm that the B Syrups are marketed as flavourings for beverages (coffee, milkshakes, thickshakes) and food (dessert flavouring for dessert food). Therefore the supply of the remaining B flavour syrups would be GST-free under section 38-2 of the GST Act as it could be used as a condiment for food and is not excluded from being GST-free by section 38-3 of the GST Act.