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: 180388
Dear [Client]:
Subject: GST/HST INTERPRETATION
GST/HST Status of […][X] Juice Concentrate
Thank you for your letter of [mm/dd/yyyy], concerning the application of the goods and services Tax (GST)/harmonized sales tax (HST) to […][X] Juice Concentrate (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.
We understand from your letter and from our review of […][the Company’s] website the following:
1. The Product is described on [the Company’s] website as […][X] syrup. The Product label describes the Product as [X] drink concentrate.
2. Both the Product label and [the Company’s] website suggest that the Product be mixed with water and diluted at a ratio of […].
3. The Product is sold in a […] mL […] bottle and retails for $[…].
4. The [Company’s] website suggests that the Product be consumed as a table drink or used as the base in different drinks.
5. Smaller, already diluted versions are sold in […] packs as [X] drinks.
INTERPRETATION REQUESTED
You would like to know whether supplies of the Product would be zero-rated for GST/HST purposes.
INTERPRETATION GIVEN
As explained below, the tax status of the Product would ultimately depend on the volume of natural fruit juice in the reconstituted Product once the Product has been added to water.
Generally, supplies made in Canada are either taxable or exempt supplies. Exempt supplies are supplies that are not subject to the GST/HST and are listed in Schedule V. Taxable supplies are all supplies made in the course of a commercial activity and may be taxable at 5%, 13%, 15%, or 0% (zero-rated supplies). Zero-rated supplies are those supplies specifically listed in Schedule VI.
Basic groceries
Section 1 of Part III of Schedule VI is the general zero-rating provision that applies to food or beverages that are marketed 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 terms "food" and "beverage" are not defined in the ETA. As stated in paragraph 2 of GST/HST Memorandum 4.3, Basic Groceries (Memo 4.3), we consider 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. The term "ingredient" is also not defined in the ETA. Generally, our view is that an average consumer would consider a product to be an ingredient if the product added to the flavour, texture or appearance of the final product; that is, if it was integral to the final product. Moreover, in order to be regarded as an ingredient to a food or beverage, the final product, in and of itself, must be a food or beverage.
Non-carbonated fruit flavoured beverages
Paragraph 1(d) excludes from the zero-rating provision supplies of non-carbonated fruit juice beverages or fruit-flavoured beverages, other than milk-based beverages, that contain less than 25% by volume of:
i. a natural fruit juice or combination of natural fruit juices, or
ii. a natural fruit juice or combination of natural fruit juices that have been reconstituted into the original state,
or goods that, when added to water, produce a beverage described above.
Non-frozen concentrates
The supply of fruit juice or non-frozen fruit flavoured concentrate is taxable when the reconstituted beverage (e.g., water is added to the product to create a beverage according to instructions on the package) contains less than 25% by volume of natural juice(s).
[X] Juice Concentrate
Despite numerous attempts to contact the manufacturer, we were unable to confirm the amount by volume of natural fruit juice that would result when the reconstituted beverage is produced according to the manufacturer’s instructions. Therefore, we can only provide general guidance with respect to the tax status of this product.
For GST/HST purposes, where reconstituting the concentrate at a ratio of […] ([X] juice concentrate to water) results in a beverage that has less than 25% by volume of natural fruit juice, the Product would be excluded from zero-rating by way of paragraph 1(d) of Section 1 of Part III of Schedule VI to the ETA. Alternatively, where the reconstituted beverage has 25% or more by volume of natural fruit juice, the Product would be 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 interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) 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 905-721-5218. 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
Basic Groceries and Recaptured Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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