Private ruling: Tea
Published: July 2012

Ruling: Q1: Is the supply of ingredient for beverage GST-free? Decision: Yes



Reasons for decision: Summary: A supply of food is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (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 subsection 38-4(1) of the GST Act and it includes beverages for human consumption and ingredients for beverages for human consumption (paragraph 38-4(1)(d) of the GST Act). | Detailed Reasoning - The meaning of beverage for GST purposes: The Australian Taxation Office (ATO) view on the meaning of beverage is outlined in Goods and Services Tax Determination GSTD 2002/2. Paragraphs 5 to 7 of GSTD 2002/2 state: 5. The GST Act defines beverage to include water, but does not otherwise discuss the meaning of a beverage. The word beverage appears in a similar context in the former sales tax legislation and has been considered by the courts to mean 'a drink of any kind' and, in turn, drink as 'any liquid which is swallowed to quench thirst or for nourishment.' 6. For something to be a drink, it must be a liquid to be swallowed: · to quench thirst; or · for nourishment. 7. A liquid providing nourishment will sustain life by assisting in growth or providing energy. A nutritional purpose may be contrasted with a medicinal purpose which arises where a liquid is provided for the treatment of disease or has curative or remedial properties. Therefore a beverage is a drink that is generally swallowed to quench thirst or for nourishment. In this case you have advised that the ingredients is for preparing a beverage for human consumption. The beverage is consumed to quench thirst or for nourishment only. Therefore, we consider that the ingredients satisfy the definition of food under paragraph 38-4(1)(d) of the GST Act. | Detailed Reasoning - GST status of beverages: Under paragraph 38-3(1)(d) of the GST Act, a supply of a beverage or as 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 of the GST Act (Schedule 2). Where a beverage is not listed in Schedule 2, the beverages is excluded from being a GST-free supply by section 38-3 of the GST Act. In this case as the ingredient for the beverage is food of a kind listed in Schedule 2, they are GST-free food under section 38-2 of the GST Act.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You are registered for goods and service tax (GST). | You carry on an enterprise of selling ingredients for beverages. | The ingredients for beverages are plant materials and they are for human consumption. | You advised that the beverage is for drinking purposes only. They are not marketed for medical or therapeutic purposes.