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
Case Number: 170841
Dear [Client]:
Subject: GST/HST RULING
Application of GST/HST to coconut based beverages
Thank you for your letter of June 3, 2015, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the […] coconut beverages. We apologize for the delay in responding.
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 Government of New Brunswick has proposed to increase the rate of the HST in that province from 13% to 15%, effective July 1, 2016. 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), manufactures and sells 3 coconut based beverage products (the Products) […]:
a. […] (Product A);
b. […] (Product B); and
c. […] (Product C).
2. The Company is registered for GST/HST purposes under the Business Number […].
3. The Products are sold to retailers in 1.89 litre cartons who then sell the Products to consumers.
4. The Products include […][list of ingredients]. […].
5. […] coconut cream is used as the base in the Products.
6. Product A has […]% natural coconut cream by volume.
7. Product B has […]% natural coconut cream by volume.
8. Product C has […]% natural coconut cream by volume.
9. […].
10. […][Describes consumption patterns of the Product].
11. […][Describes marketing information of the Product].
12. […][Describes marketing information of the Product].
RULING REQUESTED
You would like to know whether supplies of the Products are zero-rated under section 1 of Part III of Schedule VI.
RULING GIVEN
Based on the facts set out above, we rule that supplies of the Products are zero-rated under section 1 of Part III of Schedule VI.
EXPLANATION
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 15% in Nova Scotia, 14% in Prince Edward Island, 13% in Ontario, New Brunswick, Newfoundland and Labrador), unless the supply is zero-rated. According to subsection 165(3), 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 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 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 needs to be considered.
Paragraph 1(n) of Part III of Schedule VI 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.
Since the Products are sold in 1.86 litre containers, they meet the exception in subparagraph 1(n)(iii), and, therefore, the exclusion under paragraph 1(n) does not apply to the supplies of the Products. Supplies of the Product are zero-rated.
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 5081. 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,
Elizabeth Onsiong
Basic Groceries & Recaptured Input Tax Credit Unit
General Operation and Border Issues Division
Excise and GST/HST Rulings Directorate
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