4 January 2006 GST/HST Ruling 76855 - Application of GST/HST to XXXXX

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 (Product A) and XXXXX (Product B).

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:

Product A

Product A is sold in a XXXXX-gram box of XXXXX teabags, with each tea bag weighing XXXXX-grams. Product A is manufactured by XXXXX. Product A is XXXXX. The labeling on the box describes Product A as a tea with XXXXX, and the instructions indicate that the teabag should be steeped in boiling water.

The ingredients of Product A are XXXXX.

The box also includes the following description under the heading XXXXX:

XXXXX.

XXXXX.

XXXXX.

XXXXX.

Product B

Product B is sold in a XXXXX-gram box of XXXXX tea bags, with each tea bag weighing XXXXX-grams. Product B is manufactured by XXXXX. Product B is XXXXX. The labeling on the box describes Product B as an herbal tea and the instructions indicate that the teabag should be steeped in boiling water.

The box also describes the product as a XXXXX. Product B has a Drug Identification Number (DIN) and cautions about its use, such as to keep it out of the reach of children.

The active ingredients of Product B are XXXXX. The inactive ingredients are XXXXX.

Ruling Requested

You would like to know the GST/HST status of supplies of Products A and B.

Ruling Given

Based on the facts set out above, we rule that supplies of Products A and B are zero-rated.

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 7% on the value of the consideration for the supply, or 15% in a participating province, unless the supply is zero-rated, pursuant to section 165 of the ETA. 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 to the ETA.

Under Part III of Schedule VI to the ETA, certain supplies of basic groceries are zero-rated. Section 1 of Part III of Schedule VI to the ETA zero-rates supplies of food or 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 included in paragraphs (a) to (r) of that section. Supplies of Products A and B are not within any of paragraphs (a) to (r) of section 1 to Part III of Schedule VI.

Product A is labelled as tea and Product B is labelled as herbal tea, and their instructions for use are consistent with tea. It is the Canada Revenue Agency's position that supplies of all products that are labelled as tea (including tea, herbal tea, tisane and ice tea) are zero-rated, regardless of ingredients or any claims made on the label or in the advertising.

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

2006/01/09 — RITS 77007 — Net Metering