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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of your written advice

Authorisation Number: 1012752795652

Ruling

Subject: Health drink

Question

Is the supply of liquid health product GST free?

Advice

No

Facts

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

• You supply a liquid health product which has remedial health properties

• The consumer is advised to consume about a few mls a day for health purposes.

• The liquid health product is not consumed to quench thirst or nourishment.

Reasons for decision

Under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), you make a taxable supply if:

    • you make the supply for consideration

    • the supply is made in the course or furtherance of your enterprise

    • the supply is connected with Australia; and

    • you are registered or required to be registered.

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

Your supply satisfies all the criteria in section 9-5 of the GST Act. The supply of liquid health product is not input taxed. However, we need to determine whether the supply of liquid health product is GST-free under section 38-2 of the GST Act.

Food

A supply of a product 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:

    • beverages (or ingredient for beverages) for human consumption (paragraph 38-4(1)(c) of the GST Act).

    • ingredients for beverages for human consumption (paragraph 38-4(1)(d) of the GST Act)

The meaning of beverage is outlined in subsection 38-4(2) of the GST Act to include water. Goods and Service Tax Determination (GSTD) 2002/2 provides an explanation on the meaning of beverages for GST purposes. Paragraphs 5 to 7 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.

    7. A liquid providing nourishment will sustain life by assisting in growth or providing energy. A nutritional purpose may be contrasted with a medicinal purpose which arises where a liquid is provided for the treatment of disease or has curative or remedial properties

Therefore, a beverage is a liquid consumed (swallowed) for the purposes of quenching thirst or for nourishment. However it does not include liquids that are provided for treatments of disease or liquids that consumed for their curative or remedial properties.

Liquid health drink

You advised that the liquid health product has remedial health properties. The consumer is advised to drink a few mls of the liquid a day for health purposes. The liquid health product is not consumed to quench thirst or nourishment.

Based on the above information we consider that the liquid health product is not a beverage for GST purposes. The consumer consumes a few mls of the liquid health product a day for health purposes. The liquid health product is not consumed to quench thirst or nourishment..

As the liquid health product is not a beverage for GST purposes, it does not satisfy the meaning of food under section 38-4 of the GST Act. Section 38-2 of the GST Act does not have application to the liquid health product.

In addition, as there is no other provisions in the GST Act that will make the liquid health product GST-free, the supply is taxable under section 9-5 of the GST Act


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