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Edited version of private advice
Authorisation Number: 1052065600520
Date of advice: 23 January 2023
Ruling
Subject: GST and supply of dried kava powder
Question 1
Is the supply of dried kava powder (the Product) by Entity X GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No.
Question 2
Is the importation of the Product by Entity X a non-taxable importation under paragraph 13-10(b) of the GST Act?
Answer
No.
This private ruling applies for the following period:
1 July 2021 - 30 June 2023
Relevant facts and circumstances
This private ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are different from these facts, this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
Entity X is a bulk importer of dried kava powder (the Product).
Entity X is registered for GST.
The Product is made from kava plant that is cultivated to maturity, harvested, washed, cleaned, cut, dried, pulverised and then packaged. The Product contains 100% dried kava powder.
The Product is tan coloured with a slightly bitter taste.
The Product is commonly added to water or a juice, with some consumers filtering out some of the larger plant fibres.
Some consumers may also choose to add it to food products. The method of consumption is subjective and is determined by personal preference. For example, the Product may be added to food like any other spice would be.
The importation of kava, for food use, is subject to Regulation 5F of the Customs (Prohibited Imports) Regulations 1956 and is prohibited unless the importer holds a permit issued by the Office of Drug Control (ODC).
Entity X has been granted a permit by the ODC for the importation of kava for food purposes.
Entity X imports the Product under the permit issued by the ODC as food only and not for scientific purposes.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 13-10
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
Reasons for decision
The essential character of the Product is an ingredient for a beverage for human consumption and is 'food' for the purpose of the GST Act. However, the supply of an ingredient for a beverage for human consumption is only GST-free if it is an ingredient of a kind specified in Schedule 2 of the GST Act.
The Product is not a beverage ingredient of a kind specified in Schedule 2 as it does not fall within the genus or category of any of the items within that Schedule.
Accordingly, the supply of the Product is not GST-free and the importation of the Product is not a non-taxable importation.