Edited version of private advice

Authorisation Number: 1051965470825

Date of advice: 4 April 2022

Ruling

Subject: GST and ingredients for beverages

Question

Is the supply of a specified product range GST-free?

Answer

No. The supply of the specified product range is a taxable supply.

Relevant facts and circumstances

You are registered for GST.

You sell a specified product range called X.

You provided details of the products included in the X range (the Products).

The Products are designed for use in beverages. The Products are to be added to drinks as an additional flavour.

The Products can be used in different types of beverages including beverages which are listed in Schedule 2 to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as GST-free.

Relevant legislative provisions

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

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

A New Tax System (Goods and Services Tax) Act 1999 section 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 2

Reasons for decision

Summary

The supply of the Products is not GST-free under section 38-2 of the GST Act as the Products are not of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2).

The supply of the Products is a taxable supply under section 9-5 of the 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.

Food is defined in section 38-4 of the GST Act as:

(1)  Food means any of these, or any combination of any of these:

(a) food for human consumption (whether or not requiring processing or treatment);

(b) ingredients for food for human consumption;

(c) *beverages for human consumption;

(d) ingredients for beverages for human consumption;

(e) goods to be mixed with or added to food for human consumption (including condiments, spices, seasonings, sweetening agents or flavourings);

(f) fats and oils marketed for culinary purposes; ...

The Products are designed for use in beverages. The Products are to be added to drinks as an additional flavour.

We consider that the Products are ingredients for beverages and therefore meet the definition of food in paragraph 38-4(1)(d) of the GST Act.

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

For the Products to be GST-free they must be a beverage ingredient of a kind specified in Schedule 2. The Products are not of a kind of a beverage ingredient specified in Schedule 2 therefore the supply of the products is not GST-free under section 38-2 of the GST Act. This is regardless of whether or not the Products are used in beverages that are listed in Schedule 2.

The supply of the Products is a taxable supply as it meets all requirements of section 9-5 of the GST Act.

For completeness, if the Products are characterised as food rather than as ingredients for beverages, they may nevertheless be covered by item 18 of Schedule 1 to the GST Act (Schedule 1) as food similar to food specified in item 15 of Schedule 1, and therefore not a GST-free food.