GST and ready-to-drink iced tea

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 supplies iced tea that is marketed as ready-to-drink?

No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies iced tea that is marketed as ready-to-drink. The entity is making a taxable supply under section 9-5 of the GST Act.

The entity is a food supplier. The entity supplies iced tea that is marketed as ready-to-drink.

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.

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 by section 38-3 of the GST Act.

The meaning of food in section 38-4 of the GST Act includes beverages for human consumption (paragraph 38-4(1)(c) of the GST Act). The ready-to-drink iced tea is a beverage for human consumption and comes within the meaning of food contained in paragraph 38-4(1)(c) of the GST Act.

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

The only item in Schedule 2 that is relevant in determining the GST status of ready-to-drink iced tea is item 5 of Schedule 2 (Item 5). Item 5 lists tea (including herbal tea, fruit tea, ginseng tea and other similar beverage preparations), coffee and coffee essence, chicory and chicory essence, and malt as being GST-free.

However, clause 2 of Schedule 2 of the GST Act provides 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. The entity is supplying iced tea that is marketed as ready-to-drink. Therefore, the iced tea is excluded from being GST-free by clause 2 of Schedule 2.

Accordingly, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies iced tea that is marketed as ready-to-drink.

The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision in 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 supplies ready-to-drink iced tea.