2 May 2003 GST/HST Ruling 43531 - Application of GST/HST [Vegetable Juice Beverage in Single and Multiple Servings]

Dear XXXXX

Thank you for your letter XXXXX (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the facts described below.

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX

2. XXXXX

3. XXXXX

4. XXXXX

Ruling Requested

You have requested a ruling concerning the application of GST/HST to the supply of XXXXX.

Ruling Given

Based on the facts set out above, we rule that XXXXX falls under the zero-rating provision in section 1 of Part III of Schedule VI of the Excise Tax Act ("ETA") when XXXXX is sold in containers exceeding 600 ml or when XXXXX is sold in multiples, prepackaged by the manufacturer or producer, of single servings.

The purchase of an individual single serving (containers containing less than 600 ml) of XXXXX is, however, taxable at 7% GST or 15% HST, 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%.

The supply of basic groceries, which includes the majority of supplies of food and beverages marketed for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of such food or beverages), is zero-rated pursuant to section 1 of Part III of Schedule VI to the Excise Tax Act (ETA), with the exception of supplies identified in paragraphs 1(a) to 1(r) of that same Part.

Paragraph 1(d) of Part III of Schedule VI to the ETA excludes from zero-rating the supply of 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 this paragraph.

Although XXXXX contains both fruit and vegetable juice, the fruit juice content is merely an ingredient used as a natural sweetener and sugar substitute, and does not change the characterization of XXXXX from a vegetable juice beverage to a fruit juice beverage.

After having considered its taste, its ingredients and its labeling and promotion, it is our opinion that XXXXX is also not a fruit-flavoured beverage.

Being neither a fruit juice beverage nor a fruit-flavoured beverage, XXXXX would be considered a zero-rated basic grocery.

It is also important to note that paragraph 1(n) of Part III of Schedule VI to the ETA excludes from zero-rating the supply of:

beverages (other than unflavoured milk) or pudding, including flavoured gelatine, mousse, flavoured whipped dessert product or any other products similar to pudding, except

(i) when prepared and prepackaged specifically for consumption by babies,

(ii) when sold in multiples, prepackaged by the manufacturer or producer, of single servings, or

(iii) when the cans, bottles or other primary containers in which the beverages or products are sold contain a quantity exceeding a single serving.

Under this provision, a serving of a beverage is considered to be a single serving when the serving is less than 600 ml.

Where XXXXX is sold in multiples, prepackaged by the manufacturer or producer, of single servings, the supply is zero-rated. Where XXXXX is in a can, bottle or primary container which contains 600 ml or more, the supply of the product is also zero-rated.

The purchase of an individual single serving (or any number of loose single servings) of XXXXX is, however, taxable at 7%.

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,

Cliff Lee
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate