ATO ID 2001/451: GST and naturally carbonated mineral water
Date of decision: 16 August 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 supplies naturally carbonated mineral water?

Decision
Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies naturally carbonated mineral water.

Facts
The entity is a food supplier. The entity sells water that is bottled from naturally carbonated water from a spring. The water has not been subject to further processing and does not contain any added chemicals. The naturally carbonated mineral water is not supplied 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, provided that the supply does not come within any of the exclusions listed in section 38-3 of the GST Act. Subsection 38-4(1) of the GST Act defines food for the purposes of section 38-2 of the GST Act. Paragraph 38-4(1)(c) of the GST Act provides that food includes beverages for human consumption. Naturally carbonated mineral water is a beverage for human consumption. However, under paragraph 38-3(1)(d) of the GST Act, a beverage is only GST-free if it is a beverage of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). Naturally carbonated mineral water is not specifically listed in Schedule 2. However, item 14 in Schedule 2 (Item 14) provides that a supply of water that is 'natural water, non-carbonated and without any other additives' is GST-free. As such, it is necessary to determine whether water that is 'natural water, non-carbonated and without any other additives' includes naturally carbonated water from a spring. An accepted principle of statutory interpretation (the noscitur a sociis rule) states that words take their meaning from the words with which they are associated ( Fox v. Warde [1978] VR 362: Supreme Court of Victoria). As such, the meaning of the words 'non carbonated' can be derived from the context of the surrounding words, 'and without any other additives', used in Item 14. It is considered that the use of the word 'other' implies that the carbonation is considered to be an additive. As such, water that is carbonated would be excluded from Item 14 only if the carbonation is introduced as an additive. In this case, the carbonation in the water occurs naturally and there are no other additives. As such, naturally carbonated mineral water is covered by Item 14. In addition, the supply of naturally carbonated mineral water does not fall within any of the exclusions listed 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 naturally carbonated mineral water.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 13-10 section 38-2 section 38-3 paragraph 38-3(1)(d) subsection 38-4 (1) paragraph 38-4(1)(c) Schedule 2 Schedule 2 clause 1 Schedule 2 clause 1 table item 14
Case references: Fox v. Warde [1978] VR 362
Subject references: Goods & services tax GST free GST beverages