Edited version of private advice

Authorisation Number: 1052081892020

Date of advice: 1 February 2023

Ruling

Subject: GST - ready to drink coffee with milk in a can

Question

Is the supply of Coffee with milk in a can (the Product) GST-free pursuant to section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No.

The supply of the Product is a taxable supply.

Relevant facts

You operate a business that produces the Product.

You are registered for GST.

The Product is in a slim line can of a specified volume.

You provided pictures of the Product and the label, which include:

The Product is dairy free, sweetener free, no added sugar, preservative free and naturally sweetened.

The Product contains a double shot of coffee.

The ingredients include water, brewed coffee and plant-based milk.

There is an instruction to shake before opening, store in a cool dry place and once opened to refrigerate and consume within 24 hours.

The ingredients are mixed, canned and then put through a retort process.

The Product is coffee and tastes like an iced milk latte that you get from a café.

The Product can be stored at room temperature for up to a number of months. The Product can be sold in the drinks fridge. Once opened, the Product needs to be drank within 24 hours and kept cold.

The Product will be sold wholesale to retailers. The Product will also be sold online from your website.

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 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 Schedule 2.

Reasons for decision

Summary

The supply of the Coffee with milk in a can (the Product) is not GST-free under to section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

The supply of the Product 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.

The Product is made up of various ingredients which by themselves may be GST-free. However, it is the end product that needs to be considered.

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 the Product being a beverage for human consumption, satisfies the definition of food.

However, paragraph 38-3(1)(d) of the GST Act provides that a supply of food is not GST-free if it is a beverage (or an ingredient for a beverage), other than a beverage (or ingredient) of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2).

The beverages category in Schedule 2 that is relevant for consideration is the category of 'Tea, coffee etc'. Included in this category are the following:

• Item 5 of Schedule 2 (item 5) provides that coffee and coffee essence is GST-free.
• Item 7 of Schedule 2 (item 7) provides that preparations for drinking purposes that are marketed principally as tea preparations, coffee preparations, or preparations for malted beverages are GST-free.

Clause 2 of Schedule 2 states that none of the items in the table relating to the category of tea, coffee etc include any beverage that is marketed in a ready-to-drink form.

Application to this case

The Product is double shot coffee with milk. The Product is a liquid with a brownish colour. The Product is sold in a ready-to-drink form and requires one to shake before opening to drink.

The Product is a preparation for drinking purposes marketed principally as coffee preparations, hence it is of a kind listed in item 7 and a beverage of a kind specified in Schedule 2. However, as the Product is supplied in a ready-to drink form, the exclusion in clause 2 of Schedule 2 applies. Hence, the supply of the Product is not GST-free pursuant to section 38-2 of the GST Act.

Taxable supply

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

•         the supply of the Product is for consideration

•         the supply of the Product is made in the course of your enterprise

•         the supply of the Product is connected with Australia and

•         you are registered for GST.

Furthermore, the supply of the Product is neither GST-free nor input taxed under any provisions of the GST Act or another Act. Therefore, as all the requirements of section 9-5 of the GST Act are satisfied, the supply of the Product is a taxable supply.