Edited version of your written advice

Authorisation Number: 1051180500564

Date of advice: 27 January 2017

Ruling

Subject: GST and fresh produce and juices

Question 1

Is GST payable under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), on your sales of fresh produce and juices?

Answer

GST will not be payable under section 9-5 of the GST Act on the sale of fresh produce and juices, that comprise of more than 90% fresh fruits and/or vegetables, served to customers who will not be consuming the beverages on the premises.

GST will be payable under section 9-5 of the GST Act on the sale of fresh produce and juices, that comprise of more than 90% fresh fruits and/or vegetables, to customers who consume the beverage on your premises.

Relevant facts and circumstances

You are registered for GST.

You operate a business which sells, amongst other things, fresh produce and juices comprising more than 90% fresh fruits and/or vegetables.

You also sell other beverages which comprises of less than 90% fruits and/or vegetables.

A provided a sample of the menu.

Customers are able to either sit down at your café, or they are able to order takeaway.

You sell a lot of takeaway fresh produce and juices for your customers to consume away from your premises. These drinks are sold in takeaway containers.

If a customer was seated inside your café and ordered fresh fruit and/or vegetable juice, it would be served in a glass.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1)

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

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

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

Reasons for decision

GST is payable on taxable supplies.

You make a taxable supply if you meet the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (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 Australia; 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 that is defined in section 195-1 of the GST Act)

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.

According to paragraph 38-4(1)(c) of the GST Act, the definition of food includes beverages for human consumption. Fresh fruit and vegetable juice drinks are beverages for human consumption. The supply will be GST -free under paragraph 38-3(1)(d) of the GST Act if they meet the requirements listed in clause 1 of Schedule 2 to the GST Act.

Item 12 of Schedule 2 (Item 12) to the GST Act provides that non-alcoholic and non-carbonated beverages will only be GST-free if they consist of at least 90% by volume of juices of fruits or vegetables.

Based on the information provided, your fresh produce and juices that you supply are non-alcoholic, non-carbonated and consist of more than 90% fruit and/or vegetables. Therefore, the product is covered by Item 12 and the supply will be GST-free, provided the requirements of paragraph 38-3(1)(a) of the GST Act are met.

Under paragraph 38-3(1)(a) of the GST Act, food for consumption on the premises from which it is supplied is not GST-free. Therefore, a supply of food, that would otherwise be GST-free, becomes a taxable supply if it is for consumption on the premises from which it is supplied.

Section 38-5 of the GST Act defines 'premises':

'Premises, in relation to a supply of food, includes:

(a) the place where the supply takes place; or

(b) the grounds surrounding a cafe or public house, or other outlet for the supply; or …'

Further explanation of the meaning of premises is provided in Goods and Services Tax Determination GSTD 2000/4: what does the word premises mean in the expression, a supply of food for consumption on the premises from which it is supplied?

Paragraph 1 of GSTD 2000/4 includes cafes in the definition of premises.

Goods and Services Tax Determination GSTD 2000/5 provides guidance on how to determine whether a supply of food is for consumption on the premises from which it is supplied. Paragraph 3 of GSTD 2000/5 provides that:

3. However, some suppliers will provide food for consumption both on the premises (dine in) and away from the premises (takeaway). If you supply food that would otherwise be GST-free to both dine-in and takeaway customers, you need to identify food supplied for consumption on the premises from that which is to be consumed elsewhere. If your business operations identify takeaway supplies from dine-in supplies, the takeaway food is not supplied for consumption on the premises. You will be able to identify food from dine-in food if you:

● have separate ordering and/or serving processes for dine-in and takeaway customers (for example, dine-in customers may order and receive their meals at their tables or food could be served on a plate or on a returnable tray);

● provide different packaging for dine-in and takeaway food (for example, dine-in customers may receive their water or fruit juice in a glass rather than in a sealed disposable container); or

● have different menus or product lines for dine-in and takeaway customers.

This view is further illustrated at paragraphs 9 to 12 of GSTD 2000/5 by the following examples:

Example 2

9. Heather has a snack bar in a food court. All of the water that she sells to customers, whether they drink it in the food court or take it away, is in its sealed bottled form. It is not Heather's practice to ask customers who purchase food or drink if they wish to consume it in the food court or take it away.

10. The bottled water is not served at a table and it is not served in circumstances indicating that consumption will take place on the premises (for example, accompanying a meal on a returnable tray). We will accept that the water is not supplied for consumption on the premises.

Example 3

11. The facts are the same as in example 2 except that Heather asks her customers if they wish to consume their food or drink in the food court or take it away - as she uses different packaging for dine-in and takeaway supplies.

12. For those customers who indicate that they will dine in the food court, supplies of food and drink, including whole fruit and/or bottled water which would otherwise be GST-free, are for consumption on the premises and will be taxable. For those customers who indicate that they will take the food or drink away, supplies that are otherwise GST-free are not for consumption on the premises and will remain GST-free.

Based on the facts that you provided, the situation in these examples is comparable with the manner in which supplies of your fresh produce and juices are made from your business.

You are able to distinguish between the fresh produce and juices that are to be consumed on your premises and the fresh produce and juices that are to be taken away.

The fresh produce and juices that are to be taken away are sold in takeaway containers. If a customer was seated and ordered such a drink, it would be served in a glass.

As the juices are sold in their original takeaway form and are not sold in circumstances indicating that consumption will take place on the premises, the supply of the fresh produce and juices sold in takeaway containers will be GST-free.

However, the fresh produce and juices that are supplied for consumption on the premises will be subject to GST.