ATO ID 2002/989: GST and fruit jelly juice
Date of decision: 9 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 fruit jelly juice?

Decision
No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies fruit jelly juice. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts
The entity is a food supplier. The entity supplies fruit jelly juice. The fruit jelly juice is a liquid that consists of water, sugar, fruit juice (less than 90% by volume), thickener and flavouring. It is non-alcoholic and non-carbonated. The fruit jelly juice can be consumed from its packing through a straw and is thin enough to be consumed from a glass. 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.

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. The meaning of food in section 38-4 of the GST Act includes: The fruit jelly juice can be consumed from its packing through a straw and is thin enough to be consumed from a glass. Therefore, the fruit jelly juice 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 to the fruit jelly juice is Item 12 of Schedule 2 (Item 12). Item 12 provides that non-alcoholic non-carbonated beverages, that consist of at least 90% by volume of juices of fruits or vegetables, are GST-free. Fruit jelly juice is non-alcoholic and non-carbonated, however, it consists of less than 90% by volume of fruit juice. Therefore, the fruit jelly juice is not a beverage of a kind specified in Item 12 No other items listed in Schedule 2 apply to the fruit jelly juice. Accordingly, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies fruit jelly juice. 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 provisions 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 fruit jelly juice.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 paragraph 38-3(1)(d) section 38-4 paragraph 38-4(1)(a) paragraph 38-4(1)(c) Division 40 Schedule 2 clause 1 Schedule 2 clause 1 table item 12
Subject references: Goods and services tax GST free GST beverages GST supplies & acquisitions Taxable supply