Private ruling: GST and nut paste to make nut milks (products)
Date of advice: 12 December 2017
Published: April 2018

Ruling: Q1: Is your supply of the products GST - free? | A1: No, your supply of the products is not GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (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.

Relevant facts and circumstances: You are not yet registered for Goods and Services Tax, but are considering to register once you reach the GST threshold. You sell the products which are in paste form, to make nut milks. The ingredients include raw nuts, 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 products are not milk (in the form of liquid, powdered, concentrated or condensed). The products are not an ingredient for a beverage of a kind specified in Schedule 2. Hence the supply of the products is a taxable supply, provided you are registered 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 is Australia. Where the term “Australia” has been used in this ruling, it is referring to the “indirect tax zone”. Provided you are registered or required to be registered for GST in the indirect tax zone, 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 either registered for GST or required to be registered for GST. 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 they fall within any of the exclusions in section 38-3 of the GST Act. 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 the table in Schedule 2 to consider in your case are items 1 and 2 (Item 1 and Item 2). Item 1- Milk products Item 1 provides that any of the following products is GST-free: (a) milk, skim milk or buttermilk (whether liquid, powdered, concentrated or condensed) (b) casein; (c) whey, whey powder or whey paste. The products are not milk (in the form of liquid, powdered, concentrated or condensed). We consider that your products are an ingredient for making a nut milk. The milk is created only when the products are added to water and blended. 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’. 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. The products 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 products 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

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