15 March 2001 GST/HST Ruling 31281 - Strawberry

Dear XXXXX:

This is in reply to your letter of May 17, 2000, which was initially sent to the XXXXX TIS Centre, but was subsequently transferred to our office for direct reply. You asked about the application of the Goods and Services Tax ("GST")/ Harmonized Sales Tax ("HST") to a strawberry flavoured whey protein powder, sold under the name of XXXXX XXXXX ("the product"). Our comments are set out below.

Please accept our apologies for the delay in replying to you.

Statement of Facts

Our understanding of the facts of this case is as follows:

1. The product is imported into Canada by XXXXX. It is a whey protein powder which, according to information on the label, contains 100% XXXXX whey. It provides a complete array of essential, non-essential and conditionally essential amino acids. Finally, the claim is made that it is XXXXX[.]

2. The directions for use on the label recommend that 3 scoops of the product be mixed with with one cup of water. Other possible uses are to mix 1 scoop of the product with 150-200 ml cup of liquid, sauce or mix to produce such items as strawberry muffins or strawberry yogurt.

Ruling Requested

That the supply of the strawberry flavoured product is zero-rated as a basic grocery, pursuant to section 1 of Part III of Schedule VI to the Excise Tax Act ("the Act").

Ruling Given

Based on the facts set out above, we rule that the supply of the strawberry flavoured product is taxable at the rate of 7% GST or 15% HST, as applicable, pursuant to paragraph 1(d) of Part III of Schedule VI to the Act ("paragraph 1(d)").

Explanation

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

Paragraph 1(d) excludes non-carbonated fruit juice beverages or fruit flavoured beverages, other than milk based beverages, that contain less than 25% by volume of

(i) a natural fruit juice or combination of natural fruit juices, or

(ii) a natural fruit juice or combination of natural fruit juices that have been reconstituted into the original state, or goods that, when added to water, produce a beverage included in the paragraph.

Our review of the product information submitted leads us to conclude that the strawberry flavoured product is excluded from zero-rating pursuant to paragraph 1(d). When mixed with water, the product is a non-carbonated fruit flavoured beverage that contains less than 25% by volume of natural fruit juice.

As stated in the facts, this product is imported into Canada. Division III of the Act provides that GST/HST is payable on dutiable goods (under the Customs Act) imported into Canada. Section 6 of Schedule VII to the Act provides, in part, that goods included in Part III of Schedule VI (i.e. zero-rated basic groceries) are non-taxable importations. Therefore, because the strawberry flavoured product is excluded from zero-rating, it is taxable on importation into Canada.

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 transactions for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9585.

Yours truly,

Pauline Greenblatt
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate