30 November 2007 GST/HST Interpretation 96023 - XXXXX Cranberry Juice 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.

XXXXX:

Thank you for your XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of XXXXX Cranberry Juice.

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's XXXXX.

2. The Product comes in a XXXXX mL XXXXX container.

3. The Product is labelled XXXXX.

4. Labelling includes, XXXXX. The label also states, XXXXX.

5. Directions for preparation per the label are: XXXXX.

6. Nutrition facts are based on a serving of XXXXX mL, diluted to make XXXXX mL.

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 ingredient 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.

Paragraph 1(d) of Part III of Schedule VI 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 reconstitutes into the original state,

or goods that, when added to water, produce a beverage included in this paragraph."

In this case, when the Product is prepared based on the instructions on the packaging, the resulting beverage contains 25% natural fruit juice by volume; therefore paragraph 1(d) does not apply.

Paragraph 1(n) of Part III of Schedule VI excludes from zero-rating the supply of beverages other than unflavoured milk except where it is for consumption by babies, when sold in pre-packaged multiples of single servings, or when the container in which the beverage is sold contains a quantity exceeding a single serving. The Canada Revenue Agency considers a single serving of a beverage to be a serving less than 600 ml in volume. While the Product in this case is sold in a XXXXX container containing XXXXX mL, the Product's packaging indicates that it needs to be diluted to drink. When the Product is prepared based on the instructions on the packaging, the resulting beverage is approximately XXXXX L, which exceeds the single serving size; therefore paragraph 1(n) does not apply.

As the Product does not fall within any of the exclusions in Section 1, the Product is considered to be zero-rated as a basic grocery pursuant to Section 1 of Part III of Schedule VI.

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

2007/11/13 — RITS 97036 — Supplies of Blank Audio Recording Media and the "Private Copying Levy"