19 July 2000 GST/HST Interpretation 8157/HQR0001763 - The Application of the GST/HST on Grape Must

Dear XXXXX:

Thank you for your e-mail message of July 13, 1999, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to grape must, classified under tariff item number 2204.30.00.

It is our understanding that grape must is classified under one of two separate Customs Tariff classification code headings. Classification code heading 20.09, "Fruit juices (including grape must) and vegetable juices, unfermented and not containing added spirit, whether or not containing added sugar or other sweetening matter", covers grape must for any use, provided it is unfermented or partially fermented; with an alcoholic strength that does not exceed 0.5% by volume. Grape must with an alcoholic strength greater than 0.5% by volume is covered by Classification code heading 22.04, "Wine of fresh grapes, including fortified wines; grape must other than that of heading No. 20.09".

We understand that currently, where grape must is classified under heading 20.09 of the Customs Tariff, neither the GST nor HST is charged on the importation. Where grape must is classified under heading 22.04, the importation is taxed at a rate of 7% (GST) or 15% (HST where applicable).

XXXXX.

Interpretation Requested

Is grape must a zero-rated supply pursuant to Part III of Schedule VI to the Excise Tax Act?

Interpretation Given

Section 1 of Part III of Schedule VI to the Excise Tax Act (ETA), entitled "Basic Groceries", zero-rates supplies of food or beverages 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 product falls within the scope of the exceptions set out in paragraphs 1(a) through 1(r).

Generally, to be considered a beverage, a product must be suitable for drinking as is (i.e. potable), or when added to a potable liquid such as juice or water. Furthermore, the product should be consumed for enjoyment or to quench thirst.

Our research indicates that grape must is the expressed juice of grapes and may contain the pulp and skins of the grapes. Grape must is not potable as is, but rather is used, for example, in the vinting of wine.

It is therefore our position that grape must is not a beverage, but an ingredient used in the preparation of a food or beverage. As such, grape must is zero-rated pursuant to section 1 of Part III of Schedule VI to the ETA.

Where grape must is indistinguishable from other products under a particular classification, (e.g. under statistical suffix 2204.10.00.90, "Sparkling Wine", 2204.21.40.00, "[Wine] In containers holding 2 litres or less", and 2204.29.40.00, "Grape must with fermentation prevented or arrested by the addition of alcohol") and those other products attract the GST or HST at 7% or 15%, we recognize that such supplies of grape must may inadvertently attract GST or HST. If that occurs, the recovery of the tax paid in error may be possible.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency (CCRA) with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9218.

Yours truly,

Kevin W. Smith
Goods Unit
General Operations and Border Issues (GOBI) Division
Excise and GST/HST Rulings Directorate
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