ATO ID 2002/982: GST and supply of thick shake mix
Date of decision: 17 April 2002
Business line: Indirect Tax

Issue
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 thick shake mix?

Decision
Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies thick shake mix.

Facts
The entity is a food supplier. The entity supplies thick shake mix. The thick shake mix is a powder ingredient that comes in a variety of flavours and is supplied in sachets. It is used to flavour milk. The instructions on the sachets state that the thick shake mix has to be mixed with milk or soy milk to make a thick shake. The thick shake mix is not sold for consumption on the premises from which it is supplied. The entity is registered for goods and services tax (GST).

Reasons for decision
Summary: 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 thick shake mix is a powder that is added to milk or soy milk to make a thick shake. Therefore, it is an ingredient for a beverage for human consumption. However, under paragraph 38-3(1)(d) of the GST Act, ingredients for beverages are only GST-free if they are of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). Item 9 in Schedule 2 (Item 9) lists 'dry preparations marketed for the purpose of flavouring milk'. The thick shake mix is a powder that comes in a variety of flavours and is used to flavour milk. The instructions on the sachets of the thick shake mix state that it has to be mixed with milk or soy milk to make a thick shake. Accordingly, the thick shake mix is a dry preparation marketed for the purpose of flavouring milk and is covered by Item 9. The thick shake mix is not sold for consumption on the premises from which it is supplied. Further, the supply of the thick shake mix does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies a thick shake mix.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(d) section 38-4 paragraph 38-4(1)(d) Schedule 2 clause 1 Schedule 2 clause 1 table item 9
Subject references: Goods and services tax GST free GST food Ingredients for beverages