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Edited version of your written advice
Authorisation Number: 1051213618706
Date of advice: 19 April 2017
Ruling
Subject: GST and probiotic yogurt
Reasons for decision
Question
What is the GST treatment for the supply of your yogurts?
Answer
The supply of your yogurts is GST-free.
Relevant facts and circumstances
You are a food provider supplying yoghurt products. Both products are made of milk products. They are promoted and intended to be a food, taken with cereals, smoothies etc. or on their own.
There is nothing on the labels to suggest that either product is a drinking yoghurt. They have a consistency thicker than milk.
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
A New Tax System (Goods and Services Tax) Act 1999 Schedule 1
Reasons for decision
A supply of food is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) if it satisfies the definition of food in subsection 38-4(1) of the GST Act and it is not excluded by section 38-3 of the GST Act.
Food is defined in subsection 38-4(1) of the GST Act to include food for human consumption and beverages for human consumption. The GST Act does not provide a definition of 'food', except to say it includes (among other things) 'food for human consumption' and 'beverages for human consumption'. In looking at the ordinary meaning of the word, the Macquarie Dictionary, 3rd Edition (1997) (dictionary) defines 'food' as: '1. what is eaten, or taken into the body, for nourishment'.
We consider that both yoghurt products satisfy this definition of food. The GST Act includes 'beverages' as 'food' and the criteria for determining whether a beverage is GST-free is different to that applicable to non-beverage foods. Accordingly, we must first determine whether the yoghurt products are beverages for the purposes of the GST Act.
Subsection 38-4(2) of the GST Act states that a 'beverage' includes water. The dictionary provides the ordinary meaning of the word 'beverage' which is 'any kind of drink…'. 'Drink' is in turn defined as 'any liquid which is swallowed to quench thirst, for nourishment, etc.'. In Bristol-Myers Company Pty Limited v. Commissioner of Taxation (1990) 90 ATC 4553, Lockhart J defines a beverage as '…is normally taken to quench the person's thirst or for stimulation or as an accompaniment to solid foods either at meal times or between meals'. Lockhart J added that an important part of a beverage is to replenish fluids.
From the above it can be summarised that a beverage is a liquid which either:
- quenches thirst
- is taken for stimulation
- is taken to accompany a meal, or
- replenishes fluids.
Based on the facts provided, as mentioned the yoghurt products are considered food as per section 38-4 of the GST Act but they do not fit the ordinary meaning (or description) of a beverage as defined by the dictionary, or as explained by Lockhart J in Bristol-Myers case.
Under paragraph 38-3(1)(c) of the GST Act, a supply of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1), or food that is a combination of one or more foods, at least one of which is of a kind specified in Schedule 1, is not GST-free.
Your products are not food of a kind specified in Schedule 1, nor is each a food that is a combination of one or more foods, at least one of which is of a kind specified in Schedule 1. Therefore, the two yoghurt products are not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. Furthermore, none of the other exclusions in section 38-3 of the GST Act apply to the supply of the yoghurt products.
The supply of your yoghurt products is therefore GST-free under section 38-2 of the GST Act.
Please note that the GST status of certain yogurt products are listed in our publication: ‘Detailed Food list’ (https://www.ato.gov.au/business/gst/in-detail/your-industry/food/detailed-food-list/) which is a public ruling for the purposes of the Taxation Administration Act 1953 (TAA).