Private ruling: GST and concentrate paste to make nut milks.
Date of advice: 4 October 2017
Published: February 2018

Ruling: Q1: Is your supply of the (product) GST-free? | A1: Your supply of the product is not GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). The supply of the products is a taxable supply, provided you are registered or required to be registered for GST.

Relevant facts and circumstances: You are neither registered nor required to be registered for Goods and Services Tax (GST), but have requested this ruling on the basis that you may be required to be registered for GST in the future. You sell the products which are in concentrated paste form, to make nut milks. The ingredients include raw nuts, vanilla extracts 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 paragraph 38-3(1)(d) | A New Tax System (Goods and Services Tax) Act 1999 section 38-4 | A New Tax System (Goods and Services Tax) Act 1999 paragraph 38-4(1)(a) | A New Tax System (Goods and Services Tax) Act 1999 Schedule 1 clause 1 table items 1 and 2

Reasons for decision: Summary: The supply of the products is a supply that is not GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as the products are excluded from being GST-free by paragraph 38-3(1)(d) of the GST Act. The products are considered ingredients for a beverage, but are not of a kind of milk products under item 1(a) in the table in clause 1 of Schedule 2 of the GST Act (Schedule 2) because the ingredients of the products include other ingredients, apart from nut milk paste. They do not consist solely of milk or any of the other foods listed in item 1 of Schedule 2. Your products are not beverages or ingredients of beverages listed in the table in Schedule 2. Hence the supply of the products is a taxable supply provided you are registered for GST or required to be registered for GST. | Detailed Reasoning - Detailed reasoning: GST is payable on any taxable supplies that you make. You make a taxable supply where you satisfy the requirements of section 9-5 of the GST Act, which states: You make a taxable supply if: (a) you make the supply for *consideration; and (b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and (c) the supply is *connected with the indirect tax zone; and (d) you are *registered, or *required to be registered. However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed. (*Denotes a term defined in the GST Act) The indirect tax zone included Australia. Where the term ‘Australia’ has been used in this ruling, it is referring to the ‘indirect tax zone’. We have given you general guidance about when you are required to be registered in Australia in a separate email per your agreement. Provided you are registered or required to be registered for GST in Australia, your supplies of the products satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act, because: ● you supply these products for consideration, ● these supplies are made in the course or furtherance of an enterprise that you carry on, ● these supplies are connected with Australia, and ● you are neither registered nor required to be registered for GST, but have requested this ruling on the basis that you may be required to be registered for GST in the future. There are no provisions in the GST Act under which your supplies of these products are input taxed. Therefore, what remains to be determined is whether your supplies of these products are GST-free. 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 products are characterised as ingredients for milk beverages for human consumption because they are sold in the form of paste, and the direction is to blend the products with water to make nut milk. The products satisfy the definition of food because food is defined in paragraph 38-4(1)(d) of the GST Act to include ingredients for beverages for human consumption. Therefore the next thing to consider is whether the products fall within any of the exclusions in section 38-3 of the GST Act such that they would be taxable. Under paragraph 38-3(1)(d) of the GST Act, a supply of 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). 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 of the GST Act (Schedule 2). | Detailed Reasoning - Schedule 2: The relevant items in Schedule 2 to consider in your case are items 1and 2. Item 1 Item 1 lists: (a) milk, skim milk or buttermilk (whether liquid, powdered, concentrated or condensed) (b) casein; (c) whey, whey powder or whey paste. Concentrated milk paste is listed under Item 1. The products are not of a kind of milk products under item 1(a) in the table in clause 1 of Schedule 2 of the GST Act (Schedule 2) because the ingredients of the products include other ingredients, apart from nut milk paste. Your products contain nut milk paste, but they do not consist solely of milk or any of the other foods listed in item 1 of Schedule 2. Therefore, your products are not covered by item 1. Item 2 Item 2 lists ‘*beverages consisting of products referred to in item 1 (or a combination of those products), to the extent of at least 95%, but not including flavoured beverages’. Sweeteners are not considered flavourings (in accordance with the ATO Interpretative Decision ATO ID 2001/366). However, vanilla extract would be considered a flavouring. Your products are not beverages, they are sold in the form of paste and the direction for use is to blend the products with water to make nut milk. They are ingredients for beverages; hence they are not covered by item 2. | Detailed Reasoning - Conclusion:: Your products are not beverages or ingredients of beverages listed in the table in Schedule 2 and are therefore excluded from being GST-free by paragraph 38-3(1)(d) of the GST Act. The supply of the product is a supply that is not GST-free under section 38-2 of the GST Act. Hence the supply of the products is a taxable supply provided you are registered for GST or required to be registered for GST. | Detailed Reasoning - 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 paragraph 38-3(1)(d) A New Tax System (Goods and Services Tax) Act 1999 section 38-4 A New Tax System (Goods and Services Tax) Act 1999 paragraph 38-4(1)(a) A New Tax System (Goods and Services Tax) Act 1999 Schedule 1 clause 1 table items 1 and 2