31 December 2007 GST/HST Ruling 98510 - – XXXXX [Frozen] Fruit 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 the supply of XXXXX Oil XXXXX in liquid form.

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 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. XXXXX sells a product called XXXXX Oil XXXXX (XXXXX) in liquid form. XXXXX is manufactured by XXXXX.

2. XXXXX is an oil XXXXX that contains XXXXX oils that are mechanically pressed XXXXX's packaging enclosed with your request was for the liquid form in a XXXXX mL container.

3. XXXXX.

4. XXXXX.

5. XXXXX packaging states: XXXXX.

6. XXXXX's Web site advertises XXXXX as available in liquid form in XXXXX mL, XXXXX mL, and XXXXX mL bottles as well as in XXXXX or XXXXX gel caps.

7. XXXXX's Web site provides serving suggestions and storage information. XXXXX is compatible with all foods XXXXX.

8. XXXXX. The Web site contains several recipes XXXXX.

Ruling Requested

You would like to know how the GST/HST applies to the supply of XXXXX's in liquid form.

Ruling Given

Based on the facts set out above, we rule that supplies of XXXXX's in liquid form are zero-rated under 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

Generally, every recipient of a taxable supply made in Canada shall pay tax calculated at the rate of 6% on the value of the consideration for the supply (or 14% 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.

Paragraph 2 of the enclosed GST/HST Memoranda Series 4.3, Basic Groceries, provides guidelines on what the CRA considers to be a "food" or "beverage" that consumers usually consume to allay hunger or thirst or for enjoyment rather than for therapeutic or preventative effects. Further, paragraphs 148 to 150 of this publication provide information regarding products that are considered dietary supplements that are consumed for their therapeutic or preventative effects and are taxable at 6% GST or 14% HST, as applicable. Paragraphs 155 to 159 provide factors the CRA considers when determining if a particular product is considered a dietary supplement or a food, beverage or ingredient.

XXXXX's in the liquid form (i.e., bottles in the XXXXX mL, XXXXX mL or XXXXX mL size) is considered an ingredient as there is evidence of its use as an ingredient in various foods (e.g., spreads, salads, sauces, etc.) and for the addition to food after cooking. As such, supplies of XXXXX's in liquid form are zero-rated under section 1 of Part III of Schedule VI.

Please note that supplies of XXXXX's in the gel cap form are not considered an ingredient, but rather a dietary supplement. As such, supplies of XXXXX's in the gel cap form are subject to the GST at 6% or HST at 14%, as applicable.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 306-975-6214. 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,

Cheryl McKenzie
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate