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Ruling

Subject: Taxable beverage

Question

Is the supply of your beverage GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer:

No

Relevant facts:

§ You are registered for goods and service tax (GST)

§ You are a supplier of a beverage drink.

§ The beverage is not a milk drink although it is a drink made from milk and fruits.

§ The drink is sold in a bottle and is consumed for nourishment.

§ You advise that the beverage is not for infants or invalid.

Reasons for decision

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 for beverages for human consumption (paragraph 38-4(1)(c) of the GST Act). The meaning of beverage is provided in the Goods and Services Tax Determination GSTD 2002/2. Paragraphs 5 to 6 of GSTD 2002/2 state:

5. The GST Act defines beverage to include water, but does not otherwise discuss the meaning of a beverage. The word beverage appears in a similar context in the former sales tax legislation and has been considered by the courts to mean 'a drink of any kind' and, in turn, drink as 'any liquid which is swallowed to quench thirst or for nourishment.'

6. For something to be a drink, it must be a liquid to be swallowed:

§ to quench thirst; or

§ for nourishment

You advised that the product is a drink made from milk and fruits to be consumed for nourishment. It is therefore a beverage for human consumption for GST purposes and satisfies the definition of food (in paragraph 38-4(1)(c) of the GST Act).

However, under paragraph 38-3(1)(d) of the GST Act , beverages other than a beverage of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2) is excluded from being GST-free. Therefore we need to consider whether your beverage is specified in Schedule 2.

The GST status of drinks made from milk and live culture is outlined in the Australian Taxation Office (ATO) public ruling "Detailed Food List" (Food Lists). We enclose a copy for your reference. Some examples of taxable beverages listed on the Food Lists are:

As your product drink is a beverage of a kind not specified in Schedule 2, it is therefore excluded from being GST-free under paragraph 38-3(1)(d) of the GST Act .