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: 139755
[Addressee]
May 14, 2012
Dear [Client]:
Subject: GST/HST RULING
Supplies of […][ABC Juice] - Revocation of Ruling # […]
We refer to our letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of […][ABC Juice] (the Product).
[…]
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand the facts to be as follows:
1. […].
2. The Product is supplied in […]mL […] bottles.
3. The percentage of volume of natural juices is [greater than 25]% and is comprised of […].
4. The Product label states the following: […]
5. The Product label states: “Recommended use: […]”.
6. The Company’s Website makes claims of specific therapeutic benefits when the Product is consumed. These claims are: […]
7. The website also includes the following statements about the Product: [direct quote]
8. The Product’s suggested serving is […]
RULING GIVEN
Based on the facts set out above, we rule that supplies of the Product are taxable at 5% GST or, 12%, 13%, or 15% HST as applicable, pursuant to section 165.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
EXPLANATION
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 one of the exclusions set out in paragraphs 1(a) through 1(r) applies.
The terms “food” and “beverage” are not defined in the ETA. However, for GST/HST purposes, the Canada Revenue Agency (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 allay hunger or quench thirst, or for enjoyment rather than for therapeutic or preventative effects. Products that meet special dietary needs of certain segments of the population such as those with restricted or special purpose diets, high performance athletes and dieters may not necessarily be viewed as a food or beverage.
Products that are labelled and/or marketed for the consumption of certain ingredients (nutritive or otherwise), or products that place emphasis on the perceived benefits of consumption (for example, therapeutic or preventative effects, or enhancing performance or physique) are not considered products that an average consumer would ordinarily purchase in the course of buying food or beverages. Products of this sort are considered dietary supplements and are consumed for actual or perceived health benefits. Therefore, these products would not be zero-rated basic groceries for the purposes of section I of Part III of Schedule VI.
Dietary supplements include products such as vitamins, minerals, tonics, fibre, protein powders and herbal supplements. These products are generally taken for their therapeutic or beneficial effects and are available in various forms including pill, capsule, tablet, powder, liquid, gel, wafer, and concentrates. Although these products may contain some essential nutritional elements, they are not considered to be basic groceries.
CRA publications GI-01, Products Commonly Described as Dietary Supplements, and GST/HST Memoranda Series 4.3, Basic Groceries, outline the criteria the CRA considers in determining whether a product is a food, beverage or ingredient for human consumption or a dietary supplement. The criteria include a product’s labelling, packaging/format and marketing.
The following factors as listed in GI-01, Products Commonly Described as Dietary Supplements are criteria that indicate a particular product is not a basic grocery item.
• The label or marketing material refers to the product as a “dietary supplement” or “supplement”.
• The label or marketing material claims that the product has a therapeutic or preventive effect, enhances mental or physical performance, or enhances physique.
• The label or marketing material emphasizes a particular nutrient that is not commonly regarded as an ingredient to basic groceries; for example, whey protein isolate or chlorophyll.
• The product may also emphasize the purity or source of the nutrient.
• The label or marketing material indicates a dosage size and how often the product should be taken. There may also be warnings advising certain people such as children or pregnant women not to take the product, or that the product is to be taken only as directed by a physician.
• The product has a Drug Identification Number (DIN), a Drug Identification Number Homeopathic Medicine (DIN-HM), or a Natural Products Number (NPN).
• The product lists the active or medicinal ingredients.
• The product is compared to other products that are not considered to be food, beverage or ingredient. For example, a product in powder form may be compared to a product in pill form.
• The label or marketing material focuses on the benefits to be derived from taking the product.
• The product is in a form not commonly associated with food, beverages or ingredients, for example, pills, capsules, tablets, gels, liquids in eye-dropper bottles, fibres, wafers, powders and concentrates.
• In sales catalogues or stores, the product is not placed with products that are commonly recognized as foods, beverages or ingredients. The product may be placed with non-prescription drugs.
Products consumed for beneficial effects do not fall within the meaning of a “food” or “beverage” simply because they are ingested into the body by eating or drinking. The primary focus is on the expected health benefits of ingesting the Product and not the format. Further, the Product competes with other dietary supplement products and not traditional juice products. Therefore, it is not sold as a basic grocery item.
Although some of the criteria may indicate that the product may not be a dietary supplement, on balance we have determined that the Product is a dietary supplement for GST/HST purposes. […].
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4397. 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,
Ken Syer
Manager
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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