22 November 2000 GST/HST Ruling 30701 - GST Status of the Product

Dear Sirs:

Thank you for your letter of March 22, 2000, (with attachments) addressed to our XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to a new product that you are selling called XXXXX. This request has been forwarded to Headquarters for reply.

Please note that as of November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency ("CCRA").

Statement of Facts

The following information was obtained from your letter of March 22, 2000, a copy of the product label, and from our telephone conversations:

•   XXXXX is a highly oxygenated dietary supplement.

•   The ingredients in XXXXX are pure water and oxygen; and this oxygen-rich water is designed to XXXXX.

•   XXXXX is not carbonated.

•   The suggested use, as detailed on the product label, is to put XXXXX in a XXXXX glass of pure water or juice XXXXX a day; and to XXXXX increase up to XXXXX a day thereafter.

•   XXXXX is packaged and sold in XXXXX bottles.

•   XXXXX the product is not recommended or intended for undiluted use.

•   XXXXX if users of the product are pregnant, nursing or have a medical condition, they are advised to consult a medical physician before consumption.

Ruling Requested

Whether the supply of XXXXX is zero-rated under section 1 of Part III of Schedule VI to the Excise Tax Act ("ETA").

Ruling Given

Based on the facts set out above, we rule that the supply of XXXXX is taxable at the GST rate of 7% (or HST rate of 15%, as applicable).

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Generally, every recipient of a taxable supply made in Canada shall pay to Her Majesty in right of Canada tax in respect of the supply calculated at the GST rate of 7% (or HST rate of 15%, as applicable) on the value of the consideration for the supply. Where, however, a supply is a zero-rated supply, the tax rate in respect of that supply is 0%. ^[vi]1

Section 1 of Part III of Schedule VI to the ETA provides zero-rated status to food or beverages supplied for human consumption, including sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of such food or beverages unless the food or beverages are specifically excluded from zero-rating under the provisions of paragraphs 1(a) to 1(r).

It is the CCRA's position that dietary supplements are not consumed to alleviate hunger or thirst as are foods traditionally considered basic groceries. The facts indicate that XXXXX is being sold as a dietary supplement which needs to be diluted prior to consumption. Although XXXXX is a liquid, the fact that there is a suggested daily dosage indicates that XXXXX is not a beverage and is not drunk for enjoyment or to quench thirst. As such, the product is not within the scope of section 1 of Part III of Schedule VI to the ETA.

Consequently, supplies of XXXXX are not zero-rated supplies for GST purposes; they are taxable at the GST rate of 7% (or the HST rate of 15%, as applicable).

Enclosed for your information and guidance is a copy of Chapter 4.3 of the GST/HST Memorandum Series, Basic Groceries.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-2560.

Yours truly,

Richard Aronoff
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate