Edited version of your private ruling

Authorisation Number: 1012595758546

Ruling

Subject: Goods and Services Tax (GST)

Question

Is the supply subject to GST?

Answer

Yes

Relevant facts and circumstances

· You are registered for GST.

· You are launching a new product.

· You have provided the following information concerning the product:

· The product is to be used just like milk.

· You consider the product to be a milk alternative - i.e. a product used in place of standard dairy milk.

· You advise that the product is designed to be consumed at home and used just like milk. It can be poured on to a dry cereal, it can be drunk straight, it can be used in smoothies or even in cooking.

· Information from the packaging is provided.

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(1)(c)

A New Tax System (Goods and Services Tax) Act 1999 section 38-4(1)(d)

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

A New Tax System (Goods and Services Tax) Act 1999 Schedule 2 clause 1

Reasons for decision

You make a taxable supply under section 9-5 of the GST Act if:

· you make a supply for consideration

· you make the supply in the course or furtherance of an enterprise you carry on

· you are registered for GST and

· the supply is connected with Australia

However a supply is not a taxable supply to the extent that it is GST-free or input taxed.

In your case, you are registered for GST, you will be making supplies of your product for consideration and in the course of furtherance of your enterprise in Australia. Therefore, all the elements of a taxable supply are met.

There are no provisions in the GST Act which would make the supply of your product input taxed. However, it must be determined whether or not the supply of your product is GST-free.

A supply of food is GST-free under section 38-2 of the GST Act provided that the supply does not come within any of the exclusions listed in section 38-3 of the GST Act.

Food is defined in paragraphs 38-4(1)(c) and 38-4(d) of the GST Act to include beverages for human consumption and ingredients for beverages for human consumption.

It is accepted in this case that the product satisfies the definition of food as it is a beverage for human consumption.

However, 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 of a kind listed in the table in clause 1 of Schedule 2 of the GST Act (Schedule 2).

Accordingly, if the beverage product is listed in Schedule 2 it will be GST-free.

When considering the GST treatment of your supply of the product, only the following items listed in Schedule 2 are those which may be of relevance.

· Item 1 of Schedule 2 under the category of milk products lists any of the following:

(a) milk, skim milk or buttermilk (whether liquid, powdered, concentrated or condensed)

(b) casein

(c) whey, whey powder or whey paste

· Item 2 of Schedule 2 under the category of milk products lists beverages consisting of products referred to in item 1 (or a combination of those products) to the extent of at least 95%, but not including flavoured beverages.

There are no other items in Schedule 2 that are appropriate for the product under consideration.

In your case, the product has various ingredients.

The ingredients contain other additives and cane sugar.

Given the ingredients of your product, it is considered that the product does not fall within Item 1(a) of Schedule 2 as this item does not cover a beverage with added plant fibres, additives and sugar. Therefore the first limb of Item 2 of Schedule 2 is also not satisfied as the ingredients of the product in question do not meet the requirement that it consists of at least 95% of a product referred to in Item 1(a), namely milk.

Secondly, the second limb of Item 2 of Schedule 2 requires that a product must not be a flavoured beverage.

In your case, the ingredients of the product adds to the taste of the product and imparts a flavour.

The fact that the other ingredients are added to meet the nutritional needs of consumers and may not necessarily be added to enhance the flavour, does not alter the character of the product which is that of a flavoured beverage. Regardless of its stated purpose, the addition of the other ingredients imparts a flavour to the product. The combination of the fibre, almonds, other additives and sugar forms a flavoured beverage and accordingly the product is not covered by Item 2 of Schedule 2.

The product is therefore excluded from being GST-free by paragraph 38-3(1)(d) of the GST Act.

The supply of the product is therefore not GST-free and is a taxable supply.