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, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 174476
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Tax status of […][non-carbonated fruit flavoured beverages]
Thank you for your letter of December 12, 2015, concerning the application of the goods and services tax /harmonized sales tax (GST/HST) to supplies of […][the Products]. 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
From the information provided in the request for the ruling and in review of the supplemental information provided on January 8, 2016, it is our understanding that:
1) […] [The] ([…]Company) imports […](Product A) and […](Product B), under the brand name […], for distribution in Canada.
2) The Company is a GST/HST registrant under Business Number […].
3) Product A and Product B are bottled in […]oz. ([…]mL) containers.
4) The containers are sold with a twist top cap that allows for the product to be accessed easily.
5) The nutrition facts stated on the labelling of both products identifies a serving size to be […]oz. ([…]mL).
6) Product A contains organic […][describes ingredients including juice content]. Product A also contains less than […]% […][other ingredients].
7) Product B contains organic […][describes ingredients including juice content]. Product B also contains less than […]% […][other ingredients].
8) The composition ratio for Product A is […]% water, […]% organic […][fruit 1] puree, […][other ingredient ratios].
9) The composition ratio for Product B is […]% water, […]% organic [fruit 1] puree, […][other ingredient ratios].
10) Products A and B are supplied individually in their […]oz. ([…]mL) containers and are delivered to retailers in cases containing 12 beverages.
RULING REQUESTED
You would like to know whether the supply of Product A and the supply of Product B is zero-rated under section 1 of Part III of Schedule VI.
RULING GIVEN
Based on the facts set out above, we rule that the supply of Product A is excluded from zero-rating pursuant to paragraph (d) of section 1 of Part III of Schedule VI. Furthermore, the supply of a single container of Product B that is not prepackaged in multiples by the manufacturer or producer, is excluded from zero-rating pursuant to paragraph (n) of Part III of Schedule VI.
Based on the limited information provided, we are unable to determine whether Product B is zero-rated under section 1 of Part III of Schedule VI when supplied in manufacturer cases holding 12 containers. We have provided general interpretive information in our explanation to aid you in your determination.
EXPLANATION/INTERPRETATION GIVEN
Generally, in accordance with section 165, every recipient of a taxable supply made in Canada shall pay tax calculated at the rate of 5% on the value of the consideration for the supply (or at the rate of 13% in Ontario; 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island) unless the supply is zero-rated. The tax rate in respect of a zero-rated supply is 0%. A zero-rated supply is a supply that is included in Schedule VI.
Section 1 of Part III of Schedule VI zero-rates supplies of food or beverages for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of such food or beverages) other than supplies included in paragraphs (a) to (r) of that section.
Pursuant to paragraph 1(d) of Part III of Schedule VI, supplies of non-carbonated fruit flavoured beverages that do not contain 25 % or more by volume of natural fruit juice or combination of natural fruit juices, or a natural fruit juice or combination of natural fruit juices that have been reconstituted into their original state are excluded from zero-rating. Based on the product composition document provided for Product A, the [fruit 1] puree represents […]% of the product by volume. As the natural […] fruit juice is only a component of the [fruit 1] puree and the [fruit 1] puree is the only source of fruit juice in Product A, the percentage of natural [fruit 1] juice within Product A as a whole would be less than 20%. As the natural fruit juice in Product A is less than 25% by volume, all supplies of Product A are excluded from zero-rating.
Paragraph 1(n) of Part III of Schedule VI excludes from zero-rating all beverages (excluding unflavoured milk) unless they are prepared and prepackaged specially for consumption by babies, are sold in multiples, prepackaged by the manufacturer or producer, of single servings, or when the cans, bottles or other primary containers in which the beverages or products are sold contain a quantity exceeding a single serving. As identified in GST/HST Memorandum 4.3, Basic Groceries, the CRA considers single serving beverages to be beverages sold in containers holding less than 600 ml. As represented, the supply of individual […]oz. ([…]mL) containers of either Product A or Product B, unless sold in multiples prepackaged by the manufacturer or producer, would be excluded from zero-rating by this paragraph.
Based on the product composition document for Product B, we are unable to determine whether Product B has the required 25% natural fruit juice content in order for it not to be broadly excluded from zero-rating by paragraph 1(d). Product B contains […]% of organic [fruit 1] puree and […]% organic […][fruit 2] puree. As with Product A, the natural fruit juice derived from these puree ingredients would be less than the […]% by volume of the purees combined. Further, the extent to which the […]% by volume of […][juice] concentrate combines with the ingredient of water to create a natural fruit juice is unknown. If the sum total, by volume, of natural fruit juices contained in the purees and the natural fruit juice resulting from the combining of the ingredients of water and [juice] concentrate is less than 25%, all supplies of Product B would be excluded from zero-rating by paragraph (d). Further, if the sum total of the natural juices in Product B is 25% by volume, or more, supplies of Product B would be zero-rated under section 1 of Part III of Schedule VI when sold in multiples prepackaged by the manufacturer or producer.
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. The interpretations given in this letter, including any additional information, are not rulings and do not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA's interpretative policy could affect the interpretation or the additional information provided herein.
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 the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
David Nichol
Basic Groceries and Recaptured Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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