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Ruling

Subject: Flavoured brown rice protein powder

Question 1

Are supplies of your flavoured and natural brown rice protein products GST-free?

Answer

No. The product is not a GST-free food for the purposes of section 38-2 of the GST Act. When you supply the product you will be making a taxable supply under section 9-5 of the GST Act.

This ruling applies for the following periods:

Relevant facts and circumstances

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

You supply a variety of flavoured and natural flavoured protein products. You seek a ruling on the GST classification of these.

You have supplied samples of each product. The products are sold in the packaged form as per the samples supplied.

The suggested use on the package is "to add additional protein to your diet take one or more scoops daily. Mixes great in a blender or shaker with water, rice milk, or your favourite beverage."

Brown rice protein is suitable for vegans as it contains no animal derived material. Consumption is as a beverage after mixing with a liquid of choice. Brown rice protein is a protein powder marketed as an alternative to whey based proteins, as a protein supplement in one's diet, suitable for vegetarians, vegans in particular. It is suitable for athletes, body builders, vegetarians, vegans and health enthusiasts. It is ideal for building muscle mass, assisting weight control and maintaining health and wellbeing.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   Division 38
   section 38-2
   section 38-3
   paragraph 38-3(1)(c)
   section 38-4
   paragraph 38-4(1)(d)

   paragraph 38-4(1)(e)

   Schedule 2 clause 1 table item 9

Reasons for decision

For the purposes of this ruling the reasons for decision apply to all variations of the products. For conciseness we refer to all three products as 'brown rice protein powder'.

Summary

A supply of food is GST-free under section 38-2 of the A New Tax Systems (Goods and Services Tax) Act 1999 (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.

Although the brown rice protein powder is an ingredient for a beverage, it is not an ingredient of a kind specified in Schedule 2. Therefore, you are not making a GST-free supply under section 38-2 of the GST Act when you sell brown rice protein powder (either flavoured or natural flavoured). Therefore, the supply of brown rice protein powder is a taxable supply under section 9-5 of the GST Act.

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 it does not come within any of the exclusions listed in section 38-3 of the GST Act.

The meaning of food in section 38-4 of the GST Act includes: beverages for human consumption at paragraph 38-4(1)(c); ingredients for beverages for human consumption at paragraph 38-4(1)(d); and, goods to be mixed with or added to food for human consumption (including condiments, spices, seasonings, sweetening agents or flavourings) at paragraph 38-4(1)(e). A product that is mixed with milk, water or any other liquid and then consumed is an ingredient for a beverage for human consumption.

In order to consume brown rice protein powder, in accordance with the suggested use, it is mixed in a blender or shaker with water, rice milk, or one's favourite beverage. Therefore, your labelling and marketing show that your intention for the product is that it is an ingredient for a beverage for human consumption. Therefore, brown rice protein powder satisfies the definition of food contained in paragraph 38-4(1)(d) of the GST Act.

Your labelling and marketing does not suggest that the product could also be used as an ingredient for food for human consumption. Therefore, we consider that it is an ingredient for beverages.

Under paragraph 38-3(1)(d) of the GST Act, a supply of a beverage, or an ingredient for a beverage, is not GST-free unless it is a beverage, or an ingredient for a beverage, of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). Brown rice protein powder is not specifically listed in Schedule 2. As such, it must be determined whether brown rice protein powder is an ingredient of a kind specified in Schedule 2.

The item from Schedule 2 that is of relevance is:

Item 9 - dry preparations marketed for the purpose of flavouring milk.

The word 'milk' is not defined in the GST Act. We consider that the ordinary meaning of milk can include plant milk (such as soy or rice milk). However, the meaning of the word 'milk' can also be derived from the context of the surrounding words in the table. In particular, 'soy milk' and 'rice milk' are referred to specifically as such in the legislation, as distinct from other 'milk products' (see items 1- 3) which only include mammalian milk products. We consider that the reference to 'milk' in item 9 is therefore made intending to apply to mammalian milk products. However, even if it does also include milk within the ordinary meaning (including soy milk, rice milk etc), you also recommend mixing the product with water or any other beverage. Therefore, we do not consider that your product is specifically marketed for the purpose of flavouring milk.

We also do not consider that the product is marketed for the purpose of 'flavouring' per se. Brown rice protein powder is not specifically marketed for the purpose of flavouring milk; rather, it is marketed as an additional dietary protein. It is intended to be mixed with rice milk, water or any other beverage of choice. We consider that this is the intended method of consumption rather than for the purpose of flavouring. As such, brown rice protein powder is not a dry preparation marketed for the purpose of flavouring milk and is therefore not GST-free under Item 9.

Although brown rice protein powder is an ingredient for a beverage, it is not an ingredient of a kind specified in Schedule 2. Therefore, you are not making a GST-free supply under section 38-2 of the GST Act when you sell your brown rice protein powder.

You are registered for GST and the supply would satisfy the other positive limbs of section 9-5 of the GST Act (supply made for consideration, in the course of your enterprise, connected with Australia). Therefore, a supply of your brown rice protein powder is a taxable supply under section 9-5 of the GST Act.