Private ruling: Goods and services tax (GST) and juices.
Date of advice: 19 December 2017
Published: May 2018

Ruling: Q1: Is your supply of the products a GST-free supply pursuant to section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No.

Relevant facts and circumstances: You are a food supplier. You are registered for goods and services tax (GST). You supply products which are non-alcoholic non-carbonated beverages. They comprise predominantly of fruit juice with the remaining volume being made up of natural water and other ingredients.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999, Section 38-2 | A New Tax System (Goods and Services Tax) Act 1999, Section 38-3 | A New Tax System (Goods and Services Tax) Act 1999 Section 38-4 | A New Tax System (Goods and Services Tax) Act 1999 Schedule 2 clause 1

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 beverages for human consumption (paragraph 38-4(1)(c) of the GST Act). The products are supplied for drinking. As such, it is a beverage for human consumption. Therefore, the products come within the meaning of food contained in section 38-4 of the GST Act as a beverage for human consumption. However, under paragraph 38-3(1)(d) of the GST Act, a supply of a beverage is not GST-free unless it is a beverage of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). 10 Fruit and vegetable juices concentrates for making non-alcoholic * beverages, if the concentrates consist of at least 90% by volume of juices of fruits 11 non-alcoholic carbonated * beverages, if they consist wholly of juices of fruits or vegetables 12 non-alcoholic non-carbonated * beverages, if they consist of at least 90% by volume of juices of fruits or vegetables 14 Water natural water, non-carbonated and without any other additives We will discuss items 10, 11, 12 and 14 of Schedule 2 (Item 10, Item 11, Item 12 and Item 14). The products are not water so they are not covered under Item 14. The products are not covered by Item 10 because they are not concentrates, nor are they covered by Item 11 because they are not carbonated beverages. Of most relevance to the products is item 12, which provides that non-alcoholic non-carbonated beverages, that consist of at least 90% by volume of juices of fruits or vegetables, are GST-free. There is no juice of vegetables in the products. ATO Interpretative Decision ATO ID 2004/497 states that coconuts are the fruit or seeds of the coco palm. Accordingly, coconut juice/water is considered to be the juice of a fruit. However, the products 2 and 3, each contains less than 90% coconut water. None of the products consists of at least 90% by volume of juices of fruits or vegetables. In addition, in JMB Beverages Pty Ltd v CoT [2009] 2009 ATC 20-112, Edmonds J considered the phrase 'wholly of juices of fruits' contained in item 11 of the table in clause 1 of Schedule 2 to the GST Act. The primary Judge found that there was no scope for a de minimis rule to operate in circumstances where the clear intent of the legislature was that the product consist of 100% of the juices of fruit. This was made clear by the fact that items 10 and 12 of the table only require the beverages to consist of at least 90% by volume of juices of fruits, thereby allowing the beverages to include non-fruit-based additives without the loss of the exemption from GST. 63. There is nothing in the language of the GST Act; nothing in the statutory context, by which I include Div 38, in particular Subdiv 38-A, and Schs 1 and 2 to the GST Act; and nothing in the extrinsic materials to suggest that Items 11 and 12 of the Table owe their existence to a legislative purpose of encouraging the fruit growing industry, thereby warranting a liberal rather than a narrow construction and application of the two items to promote Parliament's purpose. 98. In any event, the de minimis rule has no scope to operate in circumstances where the clear intent of the legislature was that the product consist of 100% of the juices of fruit. This is made clear by the fact that in the case of Items 10 and 12 of the Table the requirement imposed by the legislature for the volume of juices of fruit was "at least 90%" which had the effect of allowing the beverage to include non fruit based additives without the loss of the exemption. in JMB Beverages Pty Ltd v. Commissioner of Taxation [2010] FCAFC 68 the Full Court upheld the above decision that the requirement in Item 11 for carbonated beverages to 'consist wholly of juices of fruit or vegetables' requires that, apart from carbon dioxide used for carbonation, the beverage consist 100% of the juices of fruit or vegetables. The requirement does not allow any additives that are not juices of fruit or vegetables, even if the addition is only of a de minimis amount. This decision is in accordance with the decision of the primary judge and of the Supreme Court of New South Wales in P & N Beverages Australia Pty Ltd v. Commissioner of Taxation [2007] NSWSC 338. Based on the principles outlined in this judgement, the provision is clear that the beverage must be at least 90% by volume of juices of fruits or vegetables, and therefore any beverage that does not meet that requirement cannot be GST-free. In summary, the products are non-alcoholic, non-carbonated but they do not consist of at least 90% by volume of juice or vegetables and therefore are not covered by Item 12. They are not a beverage of a kind specified in the table in clause 1 of Schedule 2. | Detailed Reasoning - Conclusion:: You are not making a GST-free supply under section 38-2 of the GST Act when you supply the products.