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, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 187251
May 4, 2021
Dear [Client]
Subject: GST/HST RULING
Application of the GST/HST to the supply of fruit and vegetable juice blends
Thank you for your letter concerning the application of GST/HST to the supply of various cold press juice blends […]. 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.
STATEMENT OF FACTS
Our understanding of the facts is as follows:
1. […] (the Company) is a manufacturer of cold pressed juices.
2. The Company has introduced some new blends of juice beverages, namely, […] (the Products), […].
3. The Products consist of the following ingredients: […]
4. In our telephone conversations, it was indicated that […][Blend A] and […][Blend B] are the only Products that contain over 25% natural fruit juice. It was also indicated that the fruit juice content in all of the Products is added to provide fruit flavour to the beverages and that all blends can be regarded as being […][fruit-flavoured].
5. The Products come in single serving size bottles of [#] ml and are not carbonated.
6. The Products [including Blend A and Blend B, as well as other Blends that do not contain over 25% natural fruit juice] are sold to wholesalers in prepackaged multiples and also directly to customers through customized orders […]. The customized orders may contain up to [#] bottles. […] customers […] select the flavours they want included in their customized packs.
7. The juice packages sold to wholesalers […] [include # of the single serving] bottles and contain a mix of the Products predetermined and prepackaged by the manufacturer.
8. […] [We understand] that the cost of a custom order package is based on the price associated with each individual product selected by the customer. […].
RULING REQUESTED
You would like to know whether the Products qualify as zero-rated basic groceries under the following two scenarios:
1. When they are supplied as prepackaged cases sold to wholesalers; and
2. When they are supplied as custom order packs sold directly to customers […].
RULING GIVEN
1. Based on the facts set out above, we rule that where the prepackaged case supplied to wholesalers is comprised of more than 50% products containing 25% or more natural fruit juice, the supply of the entire case qualifies as a zero-rated basic grocery. Where the prepackaged case is comprised of 50% or more of products containing less than 25% natural fruit juice, the supply of the entire case is excluded from being zero-rated as a basic grocery.
2. With respect to the direct-to-customer custom order case, each single serving sized bottle provided within the custom pack is viewed as a separate supply. As a separate single serving of a beverage, the supply of each bottle within a custom pack is excluded from zero-rating.
EXPLANATION
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. Zero-rated supplies (listed in Schedule VI) are subject to the GST/HST at the rate of 0%. Exempt supplies (listed in Schedule V) are not subject to the GST/HST.
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), other than supplies included in paragraphs (a) to (r) of that section.
Wholesale Cases
Consistent with paragraph 168 of GST/HST Memorandum 4.3 - Basic Groceries, where prepackaged multiples of similar foods or beverages contain 50% or less otherwise zero-rated goods, the supply of the package will be excluded from zero-rating as a basic grocery. Therefore, in order to determine the tax status of the wholesale case, as described, the Company must first determine the tax status of each product within the wholesale case.
Paragraph 1(d) of Part III of Schedule VI excludes from zero-rating supplies of non-carbonated fruit juice beverages and fruit flavoured beverages with less than 25% by volume of a natural fruit juice or combination of natural fruit juices. Therefore, supplies of […][the Products that do not contain over 25% natural fruit juice], in any quantity or volume, would normally be excluded from being zero-rated basic groceries.
Furthermore, as [Blend A] and [Blend B] have 25% or more natural fruit juice, when supplied […] in multiples of single servings prepackaged by the manufacturer, supplies of these blends would normally be zero-rated as none of the exclusionary paragraphs of section 1 of Part III of Schedule VI would apply. [For GST/HST purposes, most single servings of a beverage are servings that are less than 600 mL in volume.]
Therefore, where more than 50% of the prepackaged wholesale case is comprised of blends, the supply of which would normally be zero-rated, the supply of the entire case would be zero-rated. Conversely, where 50% or more of the prepackaged wholesale case is comprised of blends, the supply of which would normally be excluded from being zero-rated, the supply of the entire case would be excluded from being zero-rated as a basic grocery.
Customized Cases
Paragraph 1(n) of Part III of Schedule VI, in part, excludes from zero-rating supplies of beverages, except when sold in multiples, prepackaged by the manufacturer or producer of single servings, or when the containers in which the beverages are sold, contain a quantity that exceeds a single serving.
Based on the fact that each bottle is individually selected by the customer and a separate charge is determined for each bottle supplied, the supply of the customized pack is not a single supply, but instead, is the supply of up to [#] separate single serving sized beverages. Further, the customized cases do not qualify as being prepackaged as each case is packaged after a custom order has been placed. By virtue of paragraph 1(n) of section 1 of Part III of Schedule VI, supplies of single serving bottles that are not prepackaged in multiples, irrespective of the quantity or flavour, are excluded from being 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 rulings given in this letter provided that: none of the issues discussed in the rulings 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)-429-1696. 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,
Siraj Patel, CGA, CPA
Senior Rulings Officer
Basic Groceries and Recaptured Input Tax Credits Unit
General Operations and Border Issues Division
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