4 March 2008 GST/HST Interpretation 102045 - Consulting services sold in conjunction with an insurance policy

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 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 has been reduced from 6% to 5% and the rate of HST from 14% to 13%. The new rates 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 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, GST/HST Rate Reduction in 2008 on the Canada Revenue Agency (CRA) Web site at www.cra-arc.gc.ca/E/pub/gi/notice226/README.html.

Statement of Facts

Our understanding of the facts is as follows:

1. The Product is manufactured by XXXXX (The Company), and is sold in a single serving XXXXX ml plastic bottle.

2. The bottles are labelled XXXXX.

3. The Product's ingredients are: XXXXX.

4. The Product contains XXXXX% of natural fruit juice by volume.

5. The Company's XXXXX describes the Product in the following manner:

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 a supply of the Product is taxable at 5% GST or 13% HST, where applicable, pursuant to section 165 XXXXX.

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

Generally, every recipient of a taxable supply made in Canada shall pay tax calculated at the rate of 5% on the value of the consideration for the supply (or 13% in the participating provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador) unless the supply is zero-rated. Zero-rated supplies are included in Schedule VI. The tax rate in respect of a zero-rated supply is 0%.

Under Part III of Schedule VI, certain supplies of basic groceries are zero-(rated)

Section 1 of Part III of Schedule VI zero-rates supplies of food or beverages for human consumption, including sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, other than supplies included in paragraphs (a) to (r) of that section.

We do not consider the Product to be fruit-flavoured for the purposes of paragraph 1(d) of Part III of Schedule VI. The Product is considered to be a green tea beverage. While the Product's ingredients include concentrated XXXXX juice, we consider the Product to be a XXXXX beverage with a hint of fruit (XXXXX% by volume), rather than a fruit-flavoured beverage.

Paragraph 1(n) of Part III of Schedule VI XXXXX 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 comes in a single serving XXXXX ml bottle, and therefore does not meet any of the inclusion provisions pursuant to subparagraph 1(n)(ii) of Part III of Schedule VI. As a result, the Product, when sold in a single serving, is subject to GST at the rate of 5% or HST at the rate of 13%.

The Product would be zero-rated when sold in multiples of single servings pre-packaged by the manufacturer and when sold in a container with a quantity exceeding a single serving. For GST/HST purposes, single servings of a beverage are servings that are less than 600 mL in volume.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-2560. 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,

Tim Myers
Technical Policy Advisor
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2008/03/07 — RITS 102735 — Temporary Importation - [Prototype Testing]