6 October 2005 GST/HST Ruling 60011 - Sale of former nursing/old age home

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.

Dear XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of XXXXX ("the Product").

All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.

Statement of Facts

Our understanding of the facts is as follows:

1. The Product is a new XXXXX beverage launched in XXXXX.

2. The Product is a combination of XXXXX.

3. The Product contains XXXXX% natural fruit juice.

4. The Product is available in XXXXX flavours, XXXXX and is sold in a XXXXX container.

5. The Product is identified as an XXXXX.

6. The amount of vitamins and minerals added to the Product is based on the limits set out in the Food and Drug Regulations under the Food and Drugs Act for fortifying XXXXX beverages.

7. The packaging includes a Heart and Stroke Foundation Health Check(tm) endorsement, a nutrition panel, and details about the healthy benefits of the Product.

8. The nutrition panel indicates that the Product is XXXXX.

9. The healthy benefits of the Product noted on the package include that the Product is XXXXX.

10. The ingredients of the XXXXX flavour are: XXXXX.

11. The nutrition facts table indicates that a XXXXX mL serving of the Product in XXXXX flavour contains the following vitamins and minerals:

XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX

12. The ingredients and the nutrition table for the other flavours are similar to the XXXXX flavour.

Ruling Requested

You would like to know the tax status of the Product.

Ruling Given

Based on the facts set out above, we rule that supplies of the Product are zero-rated pursuant to section 1 of Part III of Schedule VI to the ETA.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is 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 to the ETA 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 thirst or for enjoyment rather than for therapeutic or preventative effects.

GST/HST Policy Statement P-240, Application of GST/HST to Products Commonly Described as "Dietary Supplements", outlines the criteria that the CRA will consider in determining whether a product is a food, beverage or ingredient for human consumption or a dietary supplement. These criteria consider the labelling, packaging, and marketing of the product.

The labelling, packaging, and marketing do not indicate that the Product is a dietary supplement. The Product is not identified as a supplement, but as a XXXXX beverage. The Product does not have a Drug Identification Number (DIN), a Homeopathic Medicine Number (DIN-HM), or a Natural Product Number (NPN). The only claims made on the label are general health claims. There are no restrictions on the amount of the Product that may be consumed nor any warnings regarding the consumption of the Product. The packaging and product name emphasizes the fruit content of the Product rather than particular nutrients. The Product is marketed as a beverage and is sold in grocery stores.

Based on the criteria in GST/HST Policy Statement P-240, the Product is a beverage for GST/HST purposes.

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 such a beverage, are excluded from zero-rating under paragraph 1(d) of Part III of Schedule VI to the ETA.

The Product is a beverage that contains more than 25% by volume of a natural fruit juice or combination of natural fruit juices that have been reconstituted into their original state.

As paragraph 1(d) will not apply, supplies of the Product will be zero-rated for GST/HST purposes pursuant to section 1 of Part III of Schedule VI to the ETA.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 957-8253.

Yours truly,

Jacqueline Russell
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2005/10/07 — RITS 63065 — Subsection 136(2) of the Excise Tax Act (ETA) and Multiple Residential Complexes