ATO ID 2001/366: GST and soy milk with sugar added
Date of decision: 20 June 2001
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 sells soy milk with sugar added?

Decision
Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells soy milk with sugar added.

Facts
The entity is a food supplier that sells soy milk with a small amount of sugar added. The added sugar acts as a sweetener. The soy milk is not flavoured. 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 provided that the supply does not come within any of the exclusions listed in section 38-3 of the GST Act. Food is defined in paragraphs 38-4(1)(c) and 38-4(1)(d) of the GST Act to include beverages for human consumption and ingredients for beverages for human consumption. Soy milk with sugar added is considered to be either a beverage for human consumption or an ingredient for a beverage for human consumption. However, under paragraph 38-3(1)(d) of the GST Act, a supply of a beverage or an ingredient for a beverage is not GST-free unless it is of a kind listed in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). The item from Schedule 2 that is relevant to soy milk is item 4. Item 4 of Schedule 2 lists 'beverages consisting principally of soy milk or rice milk, but not including flavoured beverages'. In this case, the supply of soy milk with sugar added consists principally of soy milk. The added sugar acts as a sweetener and is not considered to be a flavouring. As the supply of soy milk with sugar added is covered by item 4 of Schedule 2, the supply is GST-free under section 38-2 of the GST Act.

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