Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 245954r
Business Number: […]
Dear [Client]:
Subject: GST/HST ruling
[…][prepackaged, ready-to-drink beverage]
This letter is further to our letter of [mm/dd/yyyy], in response to your correspondence of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to […][a prepackaged, ready-to-drink beverage] (Product). We are providing you with this revised response to clarify the application of the ruling provided in our Ruling Given section of the letter of [mm/dd/yyyy].
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand the following:
1. […] ([…][the Company]) is the manufacturer of the Product.
2. The Product is a prepackaged, ready-to-drink […][beverage].
3. The Company sells the Product to retailers, and to consumers on its website, […].
4. The Product is prepackaged for sale in [#] and [#] packages of [#] ml containers. There are [#] flavours: […].
5. The Product is not carbonated nor does it contain any natural fruit juice.
6. The ingredients of the Product are:
[…]
7. On the front label, the Product is described as […][a beverage] containing […][protein] and the volume indicator describes the Product as being a […][beverage serving under 600ml]
8. The following statements appear on the Company’s website:
[…]
RULING REQUESTED
You would like to know whether supplies of […][the various flavours] of the Product are zero-rated under section 1 of Part III of Schedule VI when sold in multiples prepackaged by the Company.
RULING GIVEN
Based on the facts set out above, we rule that supplies of [the various flavours] of the Product are zero-rated supplies under section 1 of Part III of Schedule VI when sold in multiples prepackaged by the Company.
EXPLANATION
Generally, in accordance with section 165, every recipient of a taxable supply made in Canada shall pay tax calculated at the rate of 5% on the value of the consideration for the supply (or at the rate of 13% in Ontario; 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island) unless the supply is zero-rated. The tax rate in respect of a zero-rated supply is 0%. A zero-rated supply is a supply that is included in Schedule VI.
Section 1 of Part III of Schedule VI 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), other than supplies listed in paragraphs (a) to (r) of that section.
The terms “food” and “beverage” are not defined in the ETA. The CRA’s approach is that these terms are to be read according to their ordinary meaning. As stated in GST/HST Memorandum 4.3, Basic Groceries (Memo 4.3), we consider a product to be a food or beverage if an average consumer would recognize and purchase the product as such in the ordinary course of buying basic groceries (i.e., food, beverages, and ingredients marketed for human consumption). This approach is based on the view that food and beverages are usually consumed by an average person to sustain or maintain life, to allay hunger or thirst, or for enjoyment rather than for therapeutic or preventative effects (e.g., to correct actual or perceived health problems) or to achieve specific beneficial benefits related to performance or physique. These latter types of products are commonly referred to as dietary supplements.
Among other factors, the CRA will consider the labelling, packaging and marketing of a product to determine whether an average consumer would consider it to be a dietary supplement rather than a food, beverage or ingredient. It should be noted that no one factor is determinative of the nature of a product and changes in the labelling, packaging and/or marketing would not necessarily result in a change in status. Paragraphs 148 to 159 of Memo 4.3 provide detailed information on dietary supplements.
Based on our review of the labelling and packaging […], and the marketing of the Product on the Company’s website, we conclude that […][supplies of the various flavours] the Product are not dietary supplements. As a consequence, [the various flavours] of the Product are subject to section 1 of Part III of Schedule VI and its exclusionary paragraphs.
Paragraph 1(n) of Part III of Schedule VI is the relevant exclusionary paragraph that needs to be considered. Paragraph 1(n) of Part III of Schedule VI excludes beverages (other than unflavoured milk) from zero-rating, except when
1) prepared and prepackaged specially for consumption by babies,
2) sold in multiples, prepackaged by the manufacturer or producer, of single servings, or
3) the cans, bottles or other primary containers in which the beverages or products are sold contain a quantity exceeding a single serving.
For GST/HST purposes, a single serving for beverages includes all servings under 600 ml in volume. [the various flavours] of the Product are sold in multiples, prepackaged by the manufacturer, of single servings; therefore, paragraph 1(n) of Part III of Schedule VI is not applicable to exclude the supplies from zero-rating. As there are no further applicable exclusions, supplies of [the various flavours] of the Product are zero-rated, pursuant to section 1 of Part III of Schedule VI.
For further information on the application of the GST/HST to beverages, refer to the information under the heading, “Non-carbonated beverages” in GST/HST Info Sheet GI-036, Beverages.
DISCLAIMER
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
CONTACT
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 778-952-5178.Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Sincerely,
Ben Lui
Industry Sector Specialist
Strategic and Emerging Issues Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate
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