Is the sale of the Products GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
No. This ruling applies for the following dd/mm/yyyy to dd/mm/yyyy
You are registered for GST. You launched your business on a specified date and started trading on a specified date. You intend to sell the Products in Australian. You provided details of the manufacturing process of the Products. You provided images of the Products in their packaging including lists of their ingredients, direction of use and their attributes. The Products are designed to be added to coffee beverages.
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 A New Tax System (Goods and Services Tax) Act 1999 Schedule 2
Summary The Products are not beverages or ingredients for beverages of a kind specified in the third column of the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). The supply of the Products therefore is excluded by paragraph 38-3(1)(d) of the GST Act from being GST-free under section 38-2 of the GST Act. The supply of the Products 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. 'Food' is defined in section 38-4 of the GST Act to include ingredients for beverages for human consumption (paragraph 38-4(1)(d) of the GST Act). The Products are designed to be added to coffee beverages for human consumption therefore they meet the definition of food in paragraph 38-4(1)(d) of the GST Act. However, pursuant to paragraph 38-3(1)(d) of the GST Act, a beverage or an ingredient for a beverage is not GST-free unless it is of a kind of a beverage or an ingredient that is specified in Schedule 2.
Accordingly, the Products will not be GST-free unless they are 'of a kind' of an ingredient for a beverage specified in Schedule 2. In this case the beverages category in Schedule 2 that is relevant for consideration is the category of 'Tea, coffee etc.', which states: Table 1 Beverages that are GST-free Item Category Beverages 5 6 7 8 9 Tea, coffee etc. tea (including herbal tea, fruit tea, ginseng tea and other similar *beverage preparations), coffee and coffee essence, chicory and chicory essence, and malt ... Preparations for drinking purposes that are marketed principally as tea preparations, coffee preparations, or preparations for malted *beverages Preparations marketed principally as substitutes for preparations covered by item 6 or 7 ... For a product to be covered under item 7, it needs to be a preparation that is marketed principally as a coffee preparation.
We consider that the Products are not preparations principally marketed as coffee preparations, rather the Products are designed to be added to coffee beverages. Hence the Products are not of a kind of products covered by item 7. Further the Products are not of a kind of products covered by any other item specified in Schedule 2. As the Products are not of a kind specified in Schedule 2, they are excluded by paragraph 38-3(1)(d) of the GST Act from being GST-free under section 38-2 of the GST Act. Section 9-5 of the GST Act provides that you make a taxable supply if the supply meets the following conditions: (a) you make the supply for consideration (b) the supply is made in the course or furtherance of an enterprise that you carry on (c) the supply is connected with Australia, and (d) you are registered, or required to be registered for GST. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
Your supply of the Products meets the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. Additionally, the supply of the Products is neither input taxed nor GST-free. Therefore, the supply of the Products is a taxable supply as it meets all the requirements of section 9-5 of the GST Act.