Edited version of your written advice

Authorisation Number: 1012905000899

Date of advice: 2 November 2015

Ruling

Subject: Goods and services tax (GST) and beverages

Question 1

Is GST payable on your sale of beverage X?

Answer

No.

Question 2

Is GST payable on your sale of beverage Y?

Answer

No.

Relevant facts and circumstances

You are registered for GST.

You manufacture two new beverages/smoothie. They are beverage X and beverage Y.

You will supply the beverages within Australia.

The ingredients of beverage X are fruit juice (less than %), fruit puree and other ingredients.

The ingredients of beverage Y are fruit juice (less than %), fruit puree and other ingredients.

The beverages are non-alcoholic and non-carbonated.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

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

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

Reasons for decisions

Question 1

Summary

Your sales of beverage X are GST-free supplies of a beverage under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Detailed reasoning

GST is payable on any taxable supplies.

You make a taxable supply where you satisfy the requirements of section 9-5 of the GST Act, which states:

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) the supply is made in the course or furtherance of an *enterprise that

you *carry on; and

(c) the supply is *connected with the indirect tax zone; and

(d) you are *registered, or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free

or *input taxed.

(*Denotes a term defined in the GST Act)

The indirect tax zone is Australia.

Section 38-2 of the GST Act states 'A supply of *food is GST-free'.

However, a supply of food is not GST-free if an exclusion in subsection 38-3(1) of the GST Act applies.

Paragraph 38-4(1)(c) of the GST Act provides that food includes beverages for human consumption. Beverage X is a beverage for human consumption. Therefore, it is food for the purposes of section 38-2 of the GST Act.

Paragraph 38-3(1)(d) of the GST Act provides that a beverage, other than a beverage of a kind specified in the third column of the table in clause 1 of Schedule 2 to the GST Act, is not GST-free.

Item 12 in the table in clause 1 of Schedule 2 to the GST Act (item 12) lists non-alcoholic non-carbonated beverages that consist of at least 90% by volume of juices of fruits or vegetables.

We consider that the phrase 'juices of fruit' in items 10, 11 and 12 in the table in clause 1 of Schedule 2 to the GST Act should be interpreted as applying to fruit juice containing fruit pulp or fruit puree.

Fruit juice products containing fruit pulp and/or fruit puree fall within the ordinary meaning of fruit juice because they are liquid and are extracted from fruit.

Beverage X is a non-alcoholic non-carbonated beverage consisting of at least % by volume of juices of fruits. The fruit puree content is included in the calculation of the juice of fruit percentage because beverage X is liquid and the fruit puree is extracted from fruit. Therefore, the product is covered by item 12.

As beverage X is a beverage covered by an item in the table in clause 1 of Schedule 2 to the GST Act, the exclusion at paragraph 38-3(1)(d) of the GST Act does not apply.

As beverage X is food and none of the exclusions in subsection 38-3(1) of the GST Act apply, your sales of beverage X are GST-free under section 38-2 of the GST Act. Hence, GST is not payable on your sales of beverage X.

Question 2

GST is not payable on your sales of beverage Y for the same reasons as why GST is not payable on your sales of beverage X.