10 December 2007 GST/HST Interpretation 100391 - Municipal Designation for Purposes of GST/HST Rebates

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 XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of 24 x XXXXX ml XXXXX Green Tea XXXXX (the Product) – XXXXX.

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

Effective January 1, 2008, the rate of the GST will be reduced from 6% to 5% and the rate of the HST from 14% to 13%. The new rates will apply to supplies for which the GST/HST is paid on or after January 1, 2008, without having become payable before that date. Specific transitional rules will 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 GST/HST Notice 226, Proposed GST/HST Rate Reduction in 2008 on the CRA Web site at www.cra-arc.gc.ca/E/pub/gi/notice226/README.html.

Statement of Facts

We understand the facts to be as follows:

1. The Product consists of 24-XXXXX ml bottles, packaged by the manufacturer.

2. The Product is labelled "XXXXX Green Tea XXXXX".

3. The ingredients of the Product are XXXXX

4. Labelling includes, XXXXX.

5. Nutrition facts are based on a serving of XXXXX ml; therefore each individual bottle is a single serving.

6. The Product is advertised on the company's website as XXXXX beverage. The website states, XXXXX

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 zero-rated pursuant to Section 1 of Part III of Schedule VI.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are 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 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 foods and beverages, unless one of the exceptions set out in paragraphs 1(a) through 1(r) apply.

In this case, the Product is promoted XXXXX beverage, and contains a form of green tea as an ingredient. We are considering this Product to be XXXXX beverage. It is the Canada Revenue Agency's position that XXXXX are excluded from the provisions of paragraph 1(d) regardless of whether the XXXXX contains any fruit juice or fruit flavouring.

Paragraph 1(n) of Part III of Schedule VI to the Act 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, unless one of the following exceptions applies:

(i) when prepared and prepackaged specially 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.

In this case, the Product consists of 24 single serving beverages, prepackaged by the manufacturer. The Product therefore meets the inclusion provisions pursuant to subparagraph 1(n)(ii) of Part III of Schedule VI.

When a manufacturer's case is broken open and single servings are supplied individually from the case, the supply of the individual single serving remains taxable at 6% GST or 14% HST. The supply of a portion of a case is also taxable at 6% GST or 14% HST. When a single serving of this Product is supplied, the supply is also 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 613-952-9218. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Michelle McCrae
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/12/10 — RITS 100314 — XXXXX Green Tea XXXXX