Edited version of private advice

Authorisation Number: 1051571438924

Date of advice: 26 August 2019

Ruling

Subject: GST and vegan milk products

Question

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

Answer

Relevant facts

You sell various products including the products listed above.

You referred us to your website for further information about you and your products.

You market your products as healthy and nutritious alternative to cow's milk and also covering the specific needs of vegetarian and vegan diets.

The Products are included in the beverages range. The Products are plant-based milks made from either seeds or nuts.

You provided labels, samples and product information:

Product A

Organic plant-based milk sugar-free

Certified organic, lactose-free, gluten-free, sugar-free, unsweetened, low salt

How to use Shake well before opening. Keep refrigerated after opening and

consume within 5 days. Can be consumed at any time of the day, hot or cold,

in coffee or tea, and can also be used in recipes: sauce, cakes, pancakes,

puddings...

Product B

Organic dairy-free plant-based sugar-free

Certified organic, lactose-free, gluten-free, sugar-free, unsweetened, low salt

How to use Shake well before opening. Keep refrigerated after opening and

consume within X days. Can be consumed at any time of the day, hot or cold,

in coffee or tea, and can also be used in recipes: sauce, cakes, pancakes,

puddings...

Product C

Organic dairy-free instant powder, can.

Contains agave syrup

How to use dissolve a few tablespoons in a glass of cold or hot water,

according to taste. Or Xg of powder for Xml of water. It can

also be used in cooking or baking. Keep in a dry and cool place.

Consume within X months after opening.

Product D

Organic milk no added sugars in instant powder, can.

Certified organic, lactose-free, gluten-free, unsweetened

How to use Dissolve a few tablespoons in a glass of cold or hot water,

according to taste or Xg of powder for Xml of water.

Consume within X months after opening. Keep in a dry and cool

place. No added sugars, can be consumed at any time of the day, hot or cold,

in coffee or tea, and can be used in your recipes: sauces cakes, pancakes,

puddings.

Product E

Organic milk no added sugars, with added calcium in instant powder, can.

Certified organic, lactose-free, gluten-free, with agave syrup, low salt, calcium

How to use Dissolve a few tablespoons in a glass of cold or hot water,

according to taste or Xg of powder for Xml of water.

Consume within X months after opening. Keep in a dry and cool

place. No added sugars, can be consumed at any time of the day, hot or cold,

in coffee or tea, and can be used in your recipes: sauces cakes, pancakes,

puddings.

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)(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)(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 2, Clause 1, item 1(a).

Reasons for decision

Summary

The supply of the Products is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

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.

The term 'food' is defined in section 38-4 of the GST Act to include (among other things):

·         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 Products are either in liquid ready to drink form or in powder form to be dissolved in water. Hence, the Products are either beverages for human consumption or ingredients for beverages for human consumption for the purposes of the GST Act and therefore, satisfy the definition of food under paragraphs 38-4(1)(c) or 38-4(1)(d) of the GST Act.

However, paragraph 38-3(1)(d) of the GST Act provides that a beverage (or an ingredient for a beverage) is not GST-free under section 38-2 of the GST Act unless it is a beverage (or an ingredient for a beverage) of a kind specified in the third column of 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.

Item 1(a) of Schedule 2 (item 1(a)) lists 'milk, skim milk or buttermilk (whether liquid, powdered, concentrated or condensed)'.

Item 2 of Schedule 2 (item 2) lists beverages consisting of products referred to in Item 1 in Schedule 2 (or a combination of those products), to the extent of at least 95%, but not including flavoured beverages.

The 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, available 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.

The Products are in either liquid and powder form:

The Products are plant-based milks made from either seeds or nuts.

Products A, B and D have no added flavourings.

Products C and E contain agave syrup. Product E contains added calcium. Sweetener and calcium are not considered flavouring. Therefore, Products C and E are considered to be unflavoured milk.

The Products are included in the beverages range and are certified organic, lactose-free and gluten-free. You market your products as healthy and nutritious alternative to cow's milk and also covering the specific needs of vegetarian and vegan diets.

We consider the Products to be milk of a kind covered by item 1(a). Hence, the exclusion at paragraph 38-3(1)(d) of the GST Act does not apply. None of the other exclusions in section 38-3 of the GST Act apply. Therefore, the supply of the Products is GST-free under section 38-2 of the GST Act.