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Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells coffee whitener?

No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells coffee whitener. The entity is making a taxable supply under section 9-5 of the GST Act.

The entity is a food supplier. The entity sells coffee whitener.

Coffee whitener is in a powdered form. Coffee whitener is an additive to coffee and is used as a non-dairy substitute for milk.

The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.

Generally, a supply of food is GST-free under section 38-2 of the GST Act, provided that the supply does not come within any of the exclusions listed in section 38-3 of the GST Act.

The term 'food' is defined in section 38-4 of the GST Act to include: beverages for human consumption (paragraph 38-4(1)(c) of the GST Act) or ingredients for beverages for human consumption (paragraph 38-4(1)(d) of the GST Act).

Coffee whitener is used as an additive to coffee and is not a beverage in its own right. Therefore, the supply of coffee whitener does not satisfy paragraph 38-4(1)(c) of the GST Act. Coffee whitener is used as a non-dairy substitute for milk in coffee. Therefore, It is an ingredient for a beverage, and therefore, satisfies 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 a supply of an ingredient of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2).

The items of relevance in this case are item 1, item 7 and item 8 of Schedule 2.

Item 1 of Schedule 2 provides that any of the following products are GST-free - milk, skim milk or buttermilk (whether liquid, powdered, concentrated or condensed), casein, whey, whey powder or whey paste. However, coffee whitener is a non-dairy substitute for milk and therefore, does not fall within item 1 of Schedule 2.

Item 7 of Schedule 2 provides that preparations for drinking purposes that are marketed principally as tea preparations, coffee preparations, or preparations for malted beverages are GST-free. However, coffee whitener on its own is not a preparation for drinking purposes that is marketed principally as a coffee preparation. Therefore, coffee whitener does not fall within item 7 of Schedule 2.

Item 8 of Schedule 2 provides that preparations marketed principally as substitutes for preparations covered by item 6 or 7 of Schedule 2 are GST-free. However, coffee whitener is not a preparation marketed principally as a substitute for a coffee preparation. Coffee whitener is a non-dairy substitute for milk. Therefore, coffee whitener does not fall within item 8 of Schedule 2.

Consequently, coffee whitener is not an ingredient for a beverage of a kind specified in Schedule 2. Therefore, coffee whitener is not GST-free under section 38-2 of the GST Act.

The entity is registered for GST and the supply of coffee whitener satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply of coffee whitener is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells coffee whitener.