19 January 2006 GST/HST Ruling 76777 - Application of GST/HST to XXXXX Nutritional Supplement Bars

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 XXXXX (the Product).

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

XXXXX.

Statement of Facts

We understand the Product contains less than 25% of natural fruit juice by volume, and is sold to food establishment operators who dilute the product with water to make a juice. Each Product has a specific ratio of water to add to the concentrate, ranging from XXXXX to XXXXX.

Product packages are sold in varying sizes; none are a single serving size or sold directly from XXXXX to final consumers. The Product will not be consumed in its original format as a single serving drink. The package sizes vary from XXXXX litres to approximately XXXXX litres.

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 the supply of the Product is taxable at 7 % (or 15% as applicable) pursuant to section 165 of the Act.

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 no future changes to the Act, 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 Act zero-rates supplies of food or beverages for human consumption ("basic groceries") and sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, unless one of the exceptions set out in paragraphs 1(a) through 1(r) applies.

Paragraph 1(d) of Part III of Schedule VI to the Act excludes from zero-rating the supply of non-carbonated fruit juice or fruit-flavoured beverages, including concentrates that, when reconstituted (according to instructions on the package) contain less than 25% by volume of natural juice(s) or goods that, when added to water, produce a beverage included in the paragraph.

The Product falls under the latter part of paragraph (d) of Part III of Schedule VI to the Act. That is, when water is added to the Product, it becomes a juice that has less than 25% by volume of natural juice. Consequently the Product is taxable as it is excluded from the zero-rating provisions.

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,

Gabrielle Nadeau
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2006/01/03 — RITS 76851 — XXXXX Crisps, XXXXX Bagel Chips and Pita Chips