11 April 2005 GST/HST Interpretation 53936 - GST Treatment of Personal Care Services

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, (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of beverages containing a blend of vegetable juice and fruit juice (the product).

Information Provided

•   You are a researcher working on a grocery store project.

•   The product is a beverage containing XXXXX juice, fruit juices and other ingredients, including sweeteners, and containing a total of XXXXX% by volume of combined vegetable and fruit juice.

•   You are aware that fruit juice beverages must contain 25% by volume or more of natural fruit juice to be zero-rated.

•   It is your understanding that vegetable juice products are generally zero-rated, without regard to the percentage of juice.

Please note that we cannot provide you with a ruling without full details about the product ^[xxviii]1. Application rulings are only provided where all of the pertinent facts can be established that relate to a particular fact situation. However, we hope the following interpretation will be of help.

Interpretation Requested

You would like to know whether XXXXX ounces (XXXXXL) bottles of the product are considered zero-rated basic grocery products.

If the presence of any amount of vegetable juice makes a beverage zero-rated, what is the treatment of vegetable/fruit juice blend products? Is this treated like a low percentage fruit juice beverage that is subject to the 7% GST, or is this considered a zero-rated vegetable juice with some fruit juice as a sweetener?

Interpretation Given

Generally, every recipient of a taxable supply made in Canada shall pay to Her Majesty in right of Canada tax in respect of the supply calculated at the GST rate of 7% (or HST rate of 15%, as applicable) on the value of the consideration for the supply. Where, however, a supply is a zero-rated supply, the tax rate in respect of that supply is 0%.

The supply of basic groceries, which includes the majority of supplies of food and beverages marketed for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of such food or beverages), is zero-rated pursuant to section 1 of Part III of Schedule VI to the Excise Tax Act (ETA), with the exception of supplies identified in paragraphs 1(a) to 1(r) of that same Part and Schedule.

Paragraph 1(d) of Part III of Schedule VI to the ETA excludes from zero-rating the supply 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 included in this paragraph.

It is also important to note that paragraph 1(n) of Part III of Schedule VI to the ETA excludes from zero-rating the supply of:

beverages (other than unflavoured milk) or pudding, including flavoured gelatine, mousse, flavoured whipped dessert product or any other products similar to pudding, except

(i) when prepared and prepackaged specifically for consumption by babies,

(ii) when sold in multiples, prepackaged by the manufacturer or producer, of single servings, or

(iii) when the cans, bottles or other primary containers in which the beverages or products are sold contain a quantity exceeding a single serving.

Under this provision, a serving of a beverage is considered to be a single serving when the serving is less than 600 ml (millilitres). In addition to volume, the Canada Revenue Agency considers the manner in which a beverage is packaged, marketed and promoted to determine if it is a single serving. For example, vegetable juices in 540 ml sealed cans (i.e., cans without built-in opening devices) are zero-rated where vegetables juices in these volumes and in this type of container are not marketed and promoted as single servings.

When a beverage contains a combination of both vegetable and fruit juice or fruit flavouring, the tax status of the product will be based on an analysis of the product that may include asking the following questions and examining the various elements of the product:

•   What are the ingredients of the product?

•   If fruit juice is an ingredient, what is the percentage by volume?

•   How is the product promoted?

•   Where is the product placed in retail stores?

•   How is the product labelled?

•   Does the product compete with other products? If so, what are they?

•   What is the size of the container?

No one element is more important than another and the respective weight of each element should be determined according to the facts of each case.

Although pure vegetable juices and pure fruit juices may be zero-rated supplies, it is possible to combine two zero-rated goods and form a new product that is taxable at 7% (or 15% where applicable). The tax status of inputs used in the manufacture of a product is not determinative of the tax status of a product.

The following information provides an interpretation of the application of the GST/HST to supplies of the product (i.e., a beverage containing a blend of vegetable juice and fruit juice) in two scenarios depending on whether or not the product is considered a fruit juice beverage or a fruit-flavoured beverage.

1. Where the product (i.e., a beverage containing a blend of vegetable juice and fruit juice) is considered a fruit juice beverage or a fruit-flavoured beverage

We have observed several products in the Canadian marketplace that are combinations of vegetable juice and fruit juice. Some of these beverages may be considered fruit juice beverages or fruit-flavoured beverages. Paragraph 1(d) of Part III of Schedule VI to the ETA applies to all non-carbonated fruit juice beverages or fruit-flavoured beverages (other than milk-based beverages) that have less than 25% by volume of natural fruit juice or a combination of natural fruit juices, regardless of whether the flavouring is from a natural source or from artificial means. In addition to considering the taste and ingredients, other information that may be considered to determine whether the product is a fruit-flavoured beverage include the promotion and labelling of the product. If after having considered its taste, ingredients, labelling and promotion, the product is a fruit-flavoured beverage, only the fruit juice content is taken into consideration when determining whether the 25% by volume threshold has been met. Where the 25% by volume threshold has not been met, the supply of the product is subject to GST/HST as it is excluded from zero-rating by virtue of paragraph 1(d) of the same Part and Schedule. This is the case, irrespective of the size of the container in which it is packaged or the packaging format (e.g., whether or not there are consumer packages containing multiples of single servings (i.e., servings under 600 ml)).

2. Where the product (i.e., a beverage containing a blend of vegetable juice and fruit juice) is not considered a fruit juice beverage nor a fruit-flavoured beverage

If after having considered its taste, ingredients, labelling and promotion, the fruit juice content of the product (i.e., a blend of vegetable juice and fruit juice) is merely an ingredient used as a natural sweetener and sugar substitute that does not change the flavour or characterization of the product from a vegetable juice beverage to a fruit juice or fruit-flavoured beverage, then the product will be zero-rated as a basic grocery under section 1 of Part III of Schedule VI to the ETA provided it is not excluded from zero-rating by another paragraph in section 1 of the same Part and Schedule.

Where the product is not a fruit juice beverage nor a fruit-flavoured beverage, then paragraph 1(n) of Part III of Schedule VI to the ETA (outlined above) must be considered to determine if the product is excluded from zero-rating.

Where this is the case (i.e., the product is not a fruit juice beverage nor a fruit-flavoured beverage) and the product is sold in multiples, pre-packaged by the manufacturer or producer of single servings, the supply continues to be zero-rated as a basic grocery under section 1 of Part III of Schedule VI to the ETA. Where the product is in a can, bottle or primary container which contains 600 ml or more, the supply of the product also continues to be zero-rated as a basic grocery under section 1 of Part III of Schedule VI to the ETA. The purchase of an individual single serving (or any number of loose single servings) of the product is, however, generally taxable at 7% (or 15% where applicable) as it is excluded from zero-rating by paragraph 1(n) of the same Part and Schedule. Finally, where the product is sold in sealed cans (i.e., cans without built-in opening devices) that are less than 600 ml the product is zero-rated as a basic grocery under section 1 of Part III of Schedule VI to the ETA where the product in these volumes and in this type of container are not marketed and promoted as single servings.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Revenue Agency with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-8503.

Yours truly,

Carolle Mercier
Goods Unit
General Operations & Border Issues Division
Excise and GST/HST Rulings Directorate

2005/04/15 — RITS 56275 — Personal Support Workers Supplied to a Hospital