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.
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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5XXXXX
XXXXX
XXXXX
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Case Number: 82623
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XXXXX
XXXXX
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October 16, 2006
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Subject:
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GST/HST RULING
XXXXX
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Dear XXXXX:
Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX (the Product).
All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.
Effective July 1, 2006, the rate of the GST has been reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST/HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to Reduction in the Rate of the GST/HST - Questions and Answers http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html on the Canada Revenue Agency Web site.
Statement of Facts
Our understanding of the facts is as follows:
1. The Product is sold in containers that are XXXXX litres in volume.
2. The ingredients of the Product are: XXXXX.
3. The packaging indicates that the Product is a source of XXXXX and states that it is XXXXX.
4. The nutrition facts table on the Product container indicates that a XXXXX mL serving of the Product contains the following vitamins and minerals:
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
5. The Product is XXXXX free.
6. The Product contains XXXXX% natural fruit juice by volume.
7. The Product is non-carbonated.
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 6% GST, or 14% HST, pursuant to section 165.
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
Generally, every recipient of a taxable supply made in Canada shall pay tax calculated at the rate of 6% on the value of the consideration for the supply (14% in the participating provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador) unless the supply is zero-rated, pursuant to subsection 165(3). 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.
Under Part III of Schedule VI, certain supplies of basic groceries are zero-rated. 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 mixed with or used in the preparation of such food or beverages, other than supplies included in 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.
GST/HST Policy Statement P-240, Application of GST/HST to Products Commonly Described as "Dietary Supplements", outlines the criteria that the CRA considers 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 juice and 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 are there 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.
The Product is a non-carbonated fruit juice or fruit flavoured XXXXX beverage containing XXXXX% natural fruit juice by volume. As a result, its supplies are excluded from zero-rating pursuant to paragraph 1(d) of Part III of Schedule VI. As there are no other applicable zero-rating or exempting provisions, supplies of the Product are taxable at 6% GST or 14% HST.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-9585.
Yours truly,
Ben Boboski
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
2006/09/22 — RITS 82624 — [Application of the GST/HST to Single Serving Beverages]
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