Edited version of private advice

Authorisation Number: 1051766502557

Date of advice: 16 October 2020

Ruling

Subject: GST and food

Question 1

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)?

Question 2

Is the importation of the products a non-taxable importation under paragraph 13-10(b) of the GST Act?

Answer 1 & 2

Relevant facts

You sell various products including the listed products.

You are registered for GST.

You provided pictures of the products and copies of manufacturer declaration for the products. Further information is available manufacturer's website, your website and social media accounts.

The products are in liquid form. They are plant-based milk products and are used as substitute for dairy milk.

Products A, B, C and D are used as substitute for dairy-based milk and used to make a drink, consumed straight as a beverage, added to cereal or used for cooking.

Product D has added flavouring and is marketed as a flavoured beverage.

Product E is used as a substitute for single cream and perfect for pouring over desserts and for sweet or savoury cooking.

Products A, B, C and D are UHT-treated and packaged in tetra pack carton. It has a shelf life of a number of months from production. Product E is UHT-treated and packaged in tetra brik carton. It has a shelf life of a few months from production date.

The packaging shows that once the product is opened it must be kept refrigerated and consumed within 5 days.

The products are currently available in supermarkets and other retailers. They are usually placed in the tea and coffee aisle with the other dairy milk substitutes.

Product C is marketed for frothing for coffees, however it can be consumed straight as a beverage or added to cereal or used for cooking.

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 Subsection 13-5(1).

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 13-10(b).

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)(a)

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)(d).

A New Tax System (Goods and Services Tax) Act 1999 Schedule 1.

A New Tax System (Goods and Services Tax) Act 1999 Schedule 2, Clause 1, item 1(a).

A New Tax System (Goods and Services Tax) Act 1999 Schedule 2, Clause 1, item 2.

Reasons for decision

Question 1

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 in subsection 38-4(1) of the GST Act to include:

·         food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act)

·         ingredients for food for human consumption (paragraph (38-4(1)(b) of the GST Act) and

·         ingredients for beverages for human consumption (paragraph (38-4(1)(d) of the GST Act).

Once it has been determined that an item is food, further consideration needs to be given to section 38-3 of the GST Act, which applies to make certain foods subject to GST.

Products A, B and C

Products A, B and C are in liquid form. They are used as substitute for dairy-based milk and used to make a drink, consumed straight as a beverage, added to cereal or used for cooking. Hence, these 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)(b) or 38-4(1)(d) of the GST Act.

However, under paragraph 38-3(1)(d) of the GST Act, a supply of a beverage or an ingredient for a beverage will only be GST-free if it is of a kind listed in the table in clause 1 of Schedule 2 of 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.

We consider Products A, B and C 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 Products A, B and C is GST-free under section 38-2 of the GST Act.

Product D

The Product D is in liquid form and used as substitute for dairy-based milk. It can be used to make a drink, consumed straight as a beverage, added to cereal or used for cooking. Hence, the Product D is either a beverage for human consumption or an ingredient for a beverage for human consumption for the purposes of the GST Act and therefore, satisfies the definition of food under paragraphs 38-4(1)(b) or 38-4(1)(d) of the GST Act.

Product D has added flavouring and is marketed as a flavoured milk. As the Product D is marketed as a flavoured beverage, it is not a beverage or ingredient for a beverage of a kind listed in item 1(a) or item 2. Further, it is not of a kind listed in any other items in Schedule 2. Hence, the supply of Product D is excluded from being GST-free under section 38-3 of the GST Act. Therefore, the supply of Product D is not GST-free under section 38-2 of the GST Act.

The supply of the Product D is a taxable supply as all the requirements of section 9-5 of the GST Act are satisfied as follows:

·         you supply it for consideration

·         the supply is made in the course or furtherance of an enterprise that you carry on

·         the supply is connected with the indirect tax zone

·         you are registered for GST and

·         the supply of the Product D is neither GST-free nor input taxed.

Product E

Product E is used as a substitute for single cream and perfect for pouring over desserts and for sweet or savoury cooking.

Product E satisfies the definition of food in paragraph 38-4(1)(a) of the GST Act as it is food for human consumption.

However, a supply of food will be subject to GST if it is food specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1) (paragraph 38-3(1)(c) of the GST Act).

Product E is not food of a kind specified in Schedule 1. Furthermore, the supply of the Product E does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the supply of the Product E is a GST-free supply under section 38-2 of the GST Act.

Question 2

GST is payable on all taxable importation of goods into Australia.

Subsection 13-5(1) of the GST Act provides that an entity makes a taxable importation if:

·         goods are imported and

·         the entity enters the goods for home consumption within the meaning of the Customs Act 1901.

However, an importation is not a taxable importation to the extent that it is a non-taxable importation.

Paragraph 13-10(b) of the GST Act provides that an importation is a non-taxable importation to the extent that, had it been a supply, the supply would have been a GST-free or input taxed supply.

As discussed in Question 1 above, the supply of Products A, B, D and E is GST-free under section 38-2 of the GST Act. Therefore, their importation is a non-taxable importation under paragraph 13-10(b) of the GST Act.

As discussed in Question 1 above, the supply of Product D is not GST-free. Hence, its importation is not a non-taxable importation under paragraph 13-10(b) of the GST Act. The importation of Product D is a taxable importation under subsection 13-5(1) of the GST Act.