GST issues registers

Food industry partnership

Issue 24 – Ingredients used for home brewing or wine making

For source of ATO view, refer to the Detailed food list.

Are ingredients used for home brewing or wine making GST-free?

It is recognised that there are some products that can be used as ingredients for food, as well as ingredients for beverages. For example, dextrose can be used as both an ingredient for food and an ingredient for beverages. This issue will provide guidance as to whether ingredients that are used in home brewing or wine making will be GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Generally, a supply of food is GST-free under section 38-2 of the GST Act provided that it does not come within any of the exclusions listed in of the GST Act.

Food is defined in paragraph 38-4(1)(b) of the GST Act to include ingredients for food for human consumption and in paragraph 38-4(1)(d) of the GST Act to include ingredients for beverages for human consumption. Ingredients that are used for the purpose of making home brew or wine may fall within either or both of these definitions.

In determining whether a product is an ingredient for food or an ingredient for a beverage, it is important to determine the essential character of the product. There are products that are generally only used as an ingredient for a beverage - for example, milk powder. Although milk powder could be used as an ingredient for cooking, its essential character is that of an ingredient for a beverage.

Guidelines for classifying ingredients for home brewing or wine making

Where a product is supplied as a GST-free ingredient for food, the fact that it could be used as an ingredient for a beverage does not change the GST-free status of the product supplied. The supplier does not need to ascertain how a customer will use the product.

However, where a product is differentiated and held out for sale as an ingredient for a beverage, GST will apply unless the ingredient is of a kind included in the table in clause 1 of Schedule 2 of the GST Act (Schedule 2).

The supplier must determine whether the product is held out for sale as an ingredient for food or an ingredient for a beverage. Some examples of the ways products may be differentiated for use in home brewing or wine making are:

•

packaging the product in combination with home brewing ingredients (that is, a home brewing kit), or

•

labelling, invoicing, marketing or otherwise displaying them as a home brewing or wine making ingredient.

The onus rests with the supplier to determine whether their product is supplied as an ingredient for food or an ingredient for a beverage.

Some examples of products that are supplied as ingredients for home brewing or wine making are:

•

kits for home-brewing, wine making etc

•

special wine and brewers' yeast, and

•

retail packs that are specialised for home brewing and winemaking, such as brewer's sugars etc.

After determining whether a product is an ingredient for a beverage and therefore satisfies the definition of food in subsection 38-4(1) of the GST Act, it needs to be decided whether it falls under one of the exclusions in section 38-3 of the GST Act. Under paragraph 38-3(1)(d) of the GST Act, the supply of an ingredient for a beverage for human consumption is only GST-free if it is an ingredient of a kind specified in Schedule 2.

Products that have been differentiated and are supplied as ingredients for home brewing or wine making will not be GST-free under section 38-2 of the GST Act as they are not ingredients of a kind listed in Schedule 2.

Example 1

A retail store sells home brewing kits. These kits are supplied as ingredients for making alcoholic beverages. Whilst some of the products included in the kit may have been GST-free if they were purchased separately, in this instance, the product to be classified is the kit. Home brewing kits are not ingredients for beverages of a kind listed in Schedule 2. Therefore, the supply of a home brewing kit will not be GST-free under section 38-2 of the GST Act.

Example 2

Sweet Treats Pty Ltd is a wholesaler of sugar products. They supply sugar to food manufacturers and beverage manufacturers. The sugar is supplied in bulk in 20kg buckets with a label stating 'Sugar'. The sugar supplied to the beverage manufacturers is not differentiated in any way from that supplied to the food manufacturers. Therefore, the sugar is considered to be an ingredient for food for human consumption (paragraph 38-4(1)(b) of the GST Act) and will be GST-free under section 38-2 of the GST Act.

Example 3

S'mart Groceries is a large chain of grocery stores. They purchase dextrose from Active Ingredients Pty Ltd who sell various ingredients. The dextrose is supplied in a clear plastic 250g bag and the only labelling is as follows:

Active Ingredients Pty Ltd
26 Masonary Street
West Dandenong VIC 3164
(09) 555 6677

Dextrose

The supply of the dextrose by Active Ingredients Pty Ltd to S'mart Groceries will be GST-free under section 38-2 of the GST Act. In this case the dextrose could be classified as either an ingredient for food for human consumption under paragraph 38-4(1)(b) of the GST Act or as an ingredient for a beverage for human consumption under paragraph 38-4(1)(d) of the GST Act. The dextrose has not been differentiated in any way and whilst it may be an ingredient for a beverage of a kind not included in Schedule 2, the dextrose is not an ingredient for food that is subject to GST. The GST-free status of the dextrose will override its taxable status.

Active ingredients do not need to ascertain what S'mart Groceries will do with the product.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).