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: 158051
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Application of GST/HST to coconut beverages
Thank you for your letter concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of […] coconut-based beverages as described below (collectively referred as the “Products”). We apologize for the delay in this response.
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. 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 the facts as follows:
1. […] (The “Company”), a marketer, manufacturer, and seller of organic and natural products, is registered for GST/HST purposes under the business number noted above.
2. The Company buys the Products from its suppliers and sells them to retailers or other distributors for resale.
3. The Products are:
[…] (Product A),
[…] (Product B),
[…] (Product C), and
[…] (Product D).
4. The Products are non-carbonated, non-alcoholic, and non-dairy beverages sold in 946ml […] containers.
5. […][Ingredient 1] and […][ingredient 2] are the primary ingredients for Product A, Product B, and Product C. [Ingredient 1], [ingredient 2], and […][ingredient 3] are the primary ingredients for Product D.
6. The Products all contain less than […]% by volume of [ingredient 2].
7. A copy of the Products composition has been provided and is reproduced in the table below:
[…]
8. Your letter, dated [mm/dd/yyyy], explains that [ingredient 2] is […]. To make [ingredient 2], […]. The [ingredient 2] that the Company uses contains […].
9. […].
10. Images of the packaging for each Product in PDF documents have been provided. The labelling of each Product contains the following descriptions: […]
11. […].
12. The labelling on the packaging and the benefit information contained in the Company’s website do not make any claims regarding any therapeutic or medicinal benefits from drinking the Products.
RULING REQUESTED
You would like to know whether:
1. The Canada Revenue Agency (the “CRA”) considers a coconut a fruit.
2. Supplies of each of the Products sold in 946ml containers are zero-rated.
RULING GIVEN
Based on the facts set out above, we determine that
1. A coconut is not a fruit for GST/HST purposes.
2. Supplies of each of the Products sold in 946ml containers are zero-rated.
EXPLANATION
1. Does the Canada Revenue Agency (the “CRA”) consider a coconut a fruit?
The ETA does not define “coconut”. Various dictionaries define the word “coconut” as a fruit, a nut, or a seed. The Harmonized Commodity Description and Coding System (the “Harmonized System”) is an internationally standardized system used by more than 200 countries, including Canada, to classify products imported into their countries. The Harmonized System classifies coconuts as nuts, rather than fruit. Therefore, in maintaining consistency with the importation of coconuts and coconut based products into Canada, the CRA does not consider the coconut to be a fruit.
2. What is the tax status of each of the Products listed above?
Generally, in accordance with section 165, every recipient of a taxable supply made in Canada is required to pay 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.
The Products are all non-alcoholic, non-carbonated, and non-dairy beverages. Since they are also not fruit flavoured beverages, only paragraph 1(n) of Part III of Schedule VI to the ETA needs to be considered.
Paragraph 1(n) of Part III of Schedule VI to the ETA provides that supplies of beverages (other than unflavoured milk) are excluded from zero-rating, except when
(i) prepared and pre-packaged specially for babies,
(ii) sold in multiples, pre-packaged by the manufacturer or producer, of single servings, or
(iii) the cans, bottles or other primary containers in which the beverages or products are sold contain a quantity exceeding a single serving.
The single serving threshold for beverages for GST/HST purposes includes all servings under 600ml in volume.
As the Products are all sold in 946ml containers, they meet the exception in subparagraph 1(n)(iii), and consequently, the exclusion under paragraph 1(n) as quoted above does not apply to the Products.
As none of the exclusions contained in section 1 of Part III of Schedule VI to the ETA apply to the Products, supplies of the Products are zero-rated for GST/HST purposes.
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 905-721-5222. 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
Senior Rulings Officer
Basic Groceries and Recaptured Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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