29 November 2007 GST/HST Ruling 97230 - Supplies of blank audio recording media and the "private copying levy"

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 letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of XXXXX (the Product).

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 is sold in XXXXX.

2. The net weight of the Product indicated on the package is XXXXX g.

3. The ingredients of the Product are XXXXX.

4. The Product is labelled as XXXXX.

5. Most of the labelling on the packaging is XXXXX, XXXXX

6. No directions for eating the product were evident on the packaging, however the picture on the label shows XXXXX.

7. The Product is ready for immediate consumption, however it could be heated.

8. The Product is advertised XXXXX as a dessert. The Product was advertised in a XXXXX as a dessert.

9. The Product includes a significant amount of fluid and pieces of soft solids consisting of XXXXX and XXXXX.

10. The product is very sweet and generally too chunky to be consumed as a drink.

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 the supplies of the Product are zero-rated (taxable at the rate of 0%) 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 or beverages, unless one of the exceptions set out in paragraphs 1(a) through 1(r) applies.

Paragraph 1(n) of Part III of Schedule VI 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 exceptions set out in subparagraphs 1(n)(i) through 1(n)(iii) applies.

The terms "food" and "beverage" are not defined in the ETA. However, the 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 sustain or maintain life, to allay hunger or thirst, or for enjoyment rather than for therapeutic or preventative effects (e.g., to correct actual or perceived health problems) or to achieve specific beneficial benefits related to performance or physique.

The CRA's approach is based on the views of an "average consumer". As a result, individual preferences for, or dislikes of, certain products would not alter the general perception that a product was, or was not, a food or beverage. In this case, we do not consider the Product to be classified as a beverage as the Product has been advertised by the manufacturer and by the merchandiser as a dessert. It is intended that the Product be eaten with a spoon, XXXXX.

As the Product has been advertised and would be viewed by the average consumer as a dessert, consideration was given to the Product being included in "other products similar to pudding". The definition of pudding is a dessert of a soft, spongy, or thick creamy consistency. While the product is considered to be a dessert, the consistency of the Product is more of a wet, watery fluid than a soft, spongy, thick creamy substance. The Product would therefore not be considered to be included in "other products similar to pudding".

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

2007/11/29 — RITS 97231 — Tax Status of [Dessert Products Not "Similar to Pudding"]