Edited version of private advice

Authorisation Number: 1051569569925

NOTICE

The private ruling on which this edited version is based has been overturned on objection.

This notice must not be taken to imply anything about the correctness of other edited versions.

Edited versions cannot be relied upon as precedent or used for determining how the ATO will apply the law in other cases.

Date of advice: 22 August 2019

Ruling

Subject: GST and supply of vanilla flavoured plant based milk and drink

Question

Is your supply of the listed products GST-free pursuant to section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Your supply of Product A and Product B is not GST-free under section 38-2 of the GST Act. The supply of vanilla flavoured milk and vanilla flavoured oat drink by you is a taxable supply under section 9-5 of the GST Act and therefore subject to GST.

Relevant facts

You are Australian entity who sells Product A and Product B. These products are either sourced locally or overseas. You have asked for the GST classification of your Product A and Product B.

Product A

Product A is a vanilla flavoured plant based milk with low sugars.

How to use

Shake well before opening. Make the perfect froth: all the best ingredients combined to help you get a creamy flavour in your coffee. Ideal for cappuccinos, mochaccinos, latte macchiatos. For use with a professional coffee machine having a steam nozzle. Steam at a maximum temperature of 60ºC. Do not steam it several times.

Keep refrigerated after opening and consume within 5 days

Product B

Product A is a vanilla flavoured plant based sugar free drink.

How to use

Shake well before opening. Make the perfect froth: all the best ingredients combined to help you get a creamy flavour in your coffee. Ideal for cappuccinos, mochaccinos, latte macchiatos. For use with a professional coffee machine having a steam nozzle. Steam at a maximum temperature of 60ºC. Do not steam it several times.

Keep refrigerated after opening and consume within 5 days

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 Paragraph 38-3(1)(c)

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

A New Tax System (Goods and Services Tax) Act 1999 Section 38-4

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-4(1)(b)

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-4(1)(c)

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

A New Tax System (Goods and Services Tax) Act 1999 Schedule 1, Clause 1, item 4

Reasons for decision

Summary

No, the supply of product A and Product B is not a GST-free food for the purposes of section 38-2 of the GST Act. When you supply vanilla flavoured Product A and Product B, you will be making a taxable supply under section 9-5 of the GST Act and therefore subject to GST.

Detailed reasoning

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.

Food is defined to include beverages for human consumption (paragraph 38-4(1)(c) of the GST Act) and ingredients for beverages for human consumption (paragraph 38-4(1)(d) of the GST Act). The Product A and B are considered to be either beverage for human consumption or ingredient for 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 to the GST Act (Schedule 2).

The phrase 'of a kind' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that term. The Macquarie Dictionary (1997) does not define the entire phrase 'of a kind'; however, it defines the word 'kind' to mean:

1. A class or group of individuals of the same nature or character, especially a natural group of animals or plants. 2. Nature or character as determining likeness or difference between things: things differing in degree rather than in kind. 3. A person or thing as being of a particular character or class: he is a strange king of hero. 4...

Accordingly, something will be 'of a kind' if it is of the same nature or character (possessing the same distinguishing qualities) as the thing or group in question.

In addition, the case law Lansell House Pty Ltd & Anor v FC of T 2011 ATC 20-239 at [30] relevantly provides:

The use of the words "of a kind" in s 38-3(1)(c) of the GST Act adds further generality to the description of the items described in Schedule 1: Air International Pty Ltd v Chief Executive Officer of Customs (2002) 121 FCR 149 per Hill J. Thus, a new product that does not possess all of the same characteristics of known crackers may nevertheless be within the relevant item...

In coming to its decision, Lansell also considered, among other things, the product's

·         use

·         in store display

·         marketing

·         tax treatment in the country of manufacture, and

·         appearance.

The items in Schedule 2 that may be applicable to Product A and Product B are:

The Australian Taxation Office (ATO) considers that the term 'milk' for the purposes of item 1(a) includes animal based milks and also plant based milks.

The Detailed Food List on the ATO website explains that the ATO has been treating plant based milks, such as oat milk, as milk for the purposes of item 1(a) since 18 June 2010.

As Product A and Product B consists of plant based milk, they may be covered by item 1(a). Furthermore, Product A and Product B are similar to rice and soy milks, we consider item 4 of Schedule 2 may be also applicable.

Product A

Item 1(a) & Item 2

Item 1(a) in the table in clause 1 of Schedule 2 to the GST Act (item 1(a)) lists 'milk' amongst other things.

Item 2 lists beverages consisting of products referred to in item 1 to the extent of at least 95%, but not including flavoured beverages.

As the Product A is vanilla flavoured plant based milk; it is specifically excluded from being listed in Schedule 2 of the GST Act by item 2 and is therefore excluded from being GST-free by paragraph 38-3(1)(d) of the GST Act.

Item 4

The explanation on beverages listed under item 4 of Schedule 2 is outlined in the ATO public ruling "Detailed Food List" (Food Lists). We enclose a copy for your reference. Soy milks that are listed in the Food Lists are:

As the Product A is vanilla flavoured plant based milk; the supply of Product A is not a beverage listed under item 4 of Schedule 2.

Product A is not a beverage listed under item 1, item 4 or any other items in Schedule 2 and hence the supply of Product A is excluded from being GST-free under section 38-3 of the GST Act. Therefore, your supply of Product A is not GST-free under section 38-2 of the GST Act.

Accordingly, your supply of Product A is a taxable supply under section 9-5 of the GST Act and therefore subject to GST.

Product B

Item 1(a)

As Product B is vanilla flavoured plant based drink, it is specifically excluded from being listed in Schedule 2 of the GST Act by item 2 and is therefore excluded from being GST-free by paragraph 38-3(1)(d) of the GST Act.

Item 4

Furthermore, as Product B is flavoured plant milk, it is not the therefore not a beverage listed under item 4 of Schedule 2.

Product B is not a beverage listed under item 1, item 2 or any other items in Schedule 2, the supply of Product B is excluded from being GST-free under section 38-3 of the GST Act. Therefore, the supply of Product B is not GST-free under section 38-2 of the GST Act.

Accordingly, your supply of Product B is a taxable supply under section 9-5 of the GST Act and therefore subject to GST.