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: 183173
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
GST/HST status of […] water concentrate
Thank you for your letter of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to […][water concentrate] (the Product).
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
Our understanding of the facts is as follows:
1. The Company is a GST/HST registrant with the business number noted above.
2. The Company produces and markets the above noted product.
3. […][Market information].
4. […][Instructions for Product use]
5. […]
6. […][Product information]
7. […][More instructions]
8. […][More Product information]
9. […][Website quotes about Product marketing]:
10. The Product comes in a […][size] bottle which, according to the label, makes […] [amount by volume] of […] water when mixed. The Nutrition Facts Table is based on a serving size of […].
11. The Product is available in […] flavours […].
12. A single bottle of the Product retails on the Company’s website for $[…].
13. […][Promotional information from the Website].
RULING REQUESTED
You would like to know whether a supply of the Product 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 the Product is a taxable supply that does not qualify for zero-rating under section 1 of Part III of Schedule VI. The Product is therefore subject to GST/HST at the applicable rate.
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 at the rate of 13% in Ontario; and 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%.
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) unless an exclusion set out in paragraph 1(a) through 1(r) of that section applies.
The terms "food" and "beverage" are not defined in the ETA. However, the CRA considers a product to be a food or beverage if an average consumer would recognize and purchase the product as such in the ordinary course of buying basic groceries. Consumers usually consume food and beverages to sustain or maintain life, to allay hunger or thirst, or for enjoyment rather than for therapeutic or preventative effects (e.g., to correct actual or perceived health problems) or to achieve specific beneficial benefits related to performance or physique.
Products commonly referred to as dietary supplements are consumed for their therapeutic or preventative effects (e.g., to correct actual or perceived health problems), or to achieve specific beneficial effects related to performance or physique. This also includes products that are labelled or marketed as products to be consumed primarily to facilitate the intake of ingredients that place an emphasis on such claims. Products commonly referred to as dietary supplements are not considered to be basic groceries and are not within the scope of section 1 of Part III of Schedule VI. As such, these products are taxable.
[…]
Based on the information reviewed, the Product on its own is not a beverage, but rather is taken with water to allow for the ingestion of the Product. The Product is to be consumed in accordance with recommended dilution instructions. The Product is not a food, beverage, or an ingredient. The Product is a dietary supplement and, as such, is not zero-rated as a basic grocery.
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(s) given in this letter provided that: none of the issues discussed in the ruling(s) 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 905-721-5218. 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,
Zubair Patel, CPA, CGA
Basic Groceries and Recapture of Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate