Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
XXXXX
Case Number: 114205
Business Number: XXXXX
Attention: XXXXX
April 7, 2010
Dear XXXXX:
Subject:
GST/HST RULING
Application of GST/HST to XXXXX Juice
Thank you for your letter of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX Juice (the Product).
HST applies at the rate of 13% in the participating provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador. 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
Our understanding of the facts is as follows:
1. The Product is sold ready to drink in XXXXX ml XXXXX bottles.
2. The Product consists of 99% fruit juice.
3. No vitamins or minerals are added to the Product.
4. The Product does not contain XXXXX.
5. The Product is not carbonated.
6. The Product contains XXXXX added as an ingredient.
7. XXXXX.
8. The Product does not have a Drug Identification Number.
9. The Product label states:
• XXXXX.
• Recommended Use: XXXXX.
• WARNING: Consult a health care practitioner prior to use if you are pregnant or breastfeeding.
• XXXXX.
• Medicinal Ingredients: XXXXX.
• Non medicinal Ingredients: XXXXX.
• Serving Portion XXXXX.
• XXXXX. No artificial flavours, colours, or sweeteners, and no added sugar.
• Refrigerate after opening.
10. The XXXXX Website states:
• XXXXX
• XXXXX
• XXXXX
Ruling Requested
You would like to know how the GST/HST applies to supplies of the Product.
Ruling Given
Based on the facts set out above, we rule that supplies of the Product are taxable at 5% GST, 13% HST 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
Generally, 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 (13% in the participating provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador) unless the supply is zero-rated. The tax rate in respect of a zero-rated supply is 0%, where 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 and 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 excluded under paragraphs (a) to (r) of that section.
The terms "food" and "beverage" are not defined in the ETA. However, 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.
With respect to ingredients, a product is an ingredient if an average consumer would recognize the product as an ingredient into food or a beverage. Generally, it is the view of the CRA 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, would be considered to be a food or beverage by the average consumer.
Products that are labelled or marketed as products to be consumed to facilitate the intake of certain ingredients (nutritive or otherwise) or which place an emphasis on claims relating to the benefits of the product, for example, therapeutic or preventative effects, or enhancing performance or physique, are not considered to be products that an average consumer would ordinarily purchase in the course of buying food or beverages.
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.
Products commonly described as dietary supplements are not considered to be basic groceries. 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.
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.
Therapeutic/preventative claims are made in respect of the Product and its benefits are touted.
Nutrients not commonly regarded as an ingredient to basic groceries (e.g., XXXXX) contained in the Product are emphasized. Medicinal ingredients and warnings are listed on the Product label. While the Product is sold in a juice format and could be consumed to quench thirst, this is secondary to its primary purpose, which is to provide a means to consume the nutrients that it contains.
As a result of the application of the criteria outlined in GI-01, Products Commonly Described as Dietary Supplements, and GST/HST Memorandum 4.3, Basic Groceries, the Product is a dietary supplement for GST/HST purposes. Consequently, supplies of the Product are taxable at 5% or 13% as applicable.
The Government of Ontario and the Government of British Columbia have each proposed a harmonized sales tax (HST) which would come into effect on July 1, 2010. The HST rate in Ontario will be 13% of which 5% will represent the federal part and 8% the provincial part. The Government of British Columbia has proposed that the HST rate would be 12% of which 5% would represent the federal part and 7% the provincial part.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9585. 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,
Ben Boboski
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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