Issue
Is the entity, a supplier of home brew products, making GST-free supplies under section 38-2 of the A New Tax System (Goods & Services Tax) Act 1999 (GST Act), when it sells: • calcium carbonate; • potassium sorbate; • licorice extract; • yeast; • grains; • sodium metabisulphite; • ascorbic acid; • citric acid; • malic acid; • martaric acid; • tartric acid • beer finings; and • hops,
as ingredients for making alcoholic home brew?
Decision
No, the entity is not making GST-free supplies under section 38-2 of the GST Act when it sells: • calcium carbonate; • potassium sorbate; • licorice extract; • yeast; • grains; • sodium metabisulphite; • ascorbic acid; • citric acid; • malic acid; • martaric acid; • tartric acid • beer finings; and • hops,
as ingredients for making alcoholic home brew. The entity is making taxable supplies under section 9-5 of the GST Act.
Facts
The entity is a supplier of home brew products. The entity sells calcium corbonate; potassium sorbate; licorice extract; yeast; grains; sodium metabisulphite; ascorbic acid; citric acid; malic acid; tartaric acid; beer finings and hops that are packaged, labelled and sold for use in making alcoholic home brew.
The entity is registered for goods and services tax (GST). The supplies meet the other positive limbs of section 9-5 of the GST Act.
Reasons for Decision
Generally, a supply of food is GST-free under section 38-2 of the GST Act provided that it does not come within any of the exclusions listed in section 38-3 of the GST Act.
Food is defined in paragraph 38-4(1)(d) of the GST Act to include ingredients for beverages for human consumption. In this case, calcium carbonate; potassium sorbate; licorice extract; yeast; grains; sodium metabisulphite; ascorbic acid; citric acid; malic acid; martaric acid; beer finings; and hops are used as ingredients to make alcoholic home brew. Therefore, they fall within the definition of food as they are ingredients for a beverage for human consumption.
However, under paragraph 38-3(1)(d) of the GST Act, 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 the table in clause 1 of Schedule 2 to the GST Act (Schedule 2).
When an entity sells calcium carbonate; potassium sorbate; licorice extract; yeast; grains; sodium metabisulphite; ascorbic acid; citric acid; malic acid; martaric acid; tartric acid; beer finings and hops regardless of whether they are used for making alcoholic or non-alcoholic beverages, the ingredients are not of a kind specified in Schedule 2.
Accordingly, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies these ingredients.
The entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, the supplies are 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 taxable supplies under section 9-5 of the GST Act when it sells calcium carbonate; potassium sorbate; licorice extract; yeast; grains; sodium metabisulphite; ascorbic acid; citric acid; malic acid; martaric acid; tartric acid; beer finings and hops that are packaged, labelled and sold for use in making alcoholic home brew.