Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 168738
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Application of GST/HST to […][the Product]
Thank you for your fax of March 9, 2015, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to […] (the Product). We apologize for the delay in responding.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand that:
1. […] (the Company) is a GST/HST registrant.
2. The Company is a wholesale distributor of organic and natural products operating from its headquarters in […][Province X], Canada.
3. The Company distributes […][many] flavours of the Product; […][list of flavours].
4. The ingredients in each flavour of the Product are as follows: […]
5. The Product is craft brewed in […] and, regardless of flavour, is produced by fermenting high quality organic teas and organic […] herbs, using organic cane sugar and a raw kombucha “symbiotic ‘colony’ of bacteria and yeast (SCOBY).
6. By-products of the fermentation process are carbon dioxide and alcohol (less than 0.5% alcohol by volume).
7. The Product is described by its producer as an effervescent drink with billions of living organisms in every bottle.
8. The Product is distributed in manufacturer cases of [#] bottles with each bottle containing […] ml of the Product.
9. The “Nutrition Facts” imprinted on the bottle represent the nutritional contents in respect of a “single serving” of […] ml.
RULING REQUESTED
You would like to know the GST/HST status of the Product.
RULING GIVEN
Based on the facts set out above, we rule that both the supply of single bottles and the supply of manufacturer cases of [#] bottles are subject to the full rate of GST/HST.
EXPLANATION
Generally, in accordance with subsections 165(1) and 165(2), every recipient of a taxable supply made in Canada is required to pay the full rate of GST/HST on the value of the consideration for the supply, unless the supply is zero-rated (listed in Schedule VI to the ETA and subject to the GST/HST at the rate of 0%).
Section 1 of Part III of Schedule VI to the ETA zero-rates supplies of food or beverages for human consumption, including sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, other than supplies included in paragraphs (a) to (r) of that section.
Paragraph 1(c) of Part III of Schedule VI excludes carbonated beverages from zero-rating. Excluded beverages can be carbonated either naturally or artificially. The words carbonated, sparkling, soda water, and effervescent are indicative of carbonation. The product, as described, is an effervescent drink that results from the fermentation of tea and […] herbs. The fermentation process creates carbon dioxide that is absorbed into the fermented tea creating a naturally carbonated beverage.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling given in this letter provided that: none of the issues discussed in the ruling are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-721-5123. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
David Nichol, CPA - CGA
Basic Groceries and Restricted Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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