21 March 2001 GST/HST Ruling 31465 - Application of GST/HST on Dietary Supplements

Dear XXXXX:

Thank you for your letter of May 25, 2000 (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the above-noted product.

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX[.]

2. Directions: Mix one level teaspoon (4 g) with 115 mL (4 oz.) or more of liquid XXXXX[.]

3. The Product is supplied in a canister XXXXX that contains XXXXX servings.

4. The label states that the product, "... XXXXX[".]

5. XXXXX "A teaspoon of the XXXXX is mixed with four ounces of water or a beverage of your choice and taken at the same time as the XXXXX."

XXXXX

Ruling Requested

What is the GST status of the Product?

Ruling Given

Based on the facts set out above, we rule that the Product is taxable at 7%, or 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 the HST of 15% where applicable, on the value of the consideration for the supply pursuant to subsections 165(1) and (2) of the Excise Tax Act (ETA). Where however, a supply is a zero-rated supply, the tax in respect of that supply is 0%.

The word 'beverage' is not defined in the Excise Tax Act (ETA). Administratively, a 'beverage' is considered to be a drink that is consumed for pleasure or to quench thirst. Although the Product is mixed with fluids and consumed by drinking, it is our position that the resultant blend is not a beverage within the administrative meaning.

Furthermore, the Product is marketed and promoted as XXXXX. The other part of the system is a XXXXX. The XXXXX are designed and recommended to be taken XXXXX to improve a person's state of intestinal health XXXXX[.] Our analysis indicates that the product is a dietary supplement intended to alter a real or perceived deficiency (XXXXX) in a person's diet. This is supported by the manner in which the product is labelled, packaged and promoted. The product label and marketing information emphasizes the health aspects of product use.

Dietary supplements are not consumed to alleviate hunger as are foods traditionally considered basic groceries. Dietary supplements are supplied in various formats - made from synthetic or natural ingredients and produced in tablet, pill, capsule, or granulated or powdered form, and commonly sold by pharmacies, and health food shops. Examples include alfalfa, yeast, ginseng, lecithin, bee pollen, seaweed or fibre produced in tablet, pill and capsule form as well as in powdered and liquid form. Dietary supplements are not within the scope of Part III of Schedule VI to the ETA and are therefore taxable at 7% (or 15% as applicable).

Based upon the ingredients, and the manner in which the product is labelled, packaged and promoted, it is our position that this product is not a beverage but a powdered dietary supplement. Accordingly, the product is not within the scope of Part III of Schedule VI and is taxable at 7%, or 15% as applicable.

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 Division
Excise and GST/HST Rulings Directorate