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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 136649
Business Number: [...]
March 21, 2012
Dear [Client]
Subject:
GST/HST RULING
Tax status of the supply of [...] [XYZ Juice]
Thank you for your letter of June 27, 2011, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of [...] [XYZ Juice] [(the Product)].
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
We understand the facts to be as follows:
1. [...] (the Company) supplies [XYZ Juice] product line [...]. The Product is comprised of [...] which are supplied in varying combinations.
2. The Product is known generically as [...]
3. The Product is supplied in varying combinations [...]
4. [...] [Ingredients described]
5. [...] [Quality of ingredients described]
6. The promotional information [...] taken from the Company's website is as follows: [...]
7. [...]
8. According to the Company, [...] [Method of consumption described]
9. The Company states the following about the Product: [...] [Benefits described]
10. The specific benefits of the Product as listed on the Company's Web site are: [...].
11. [...] [Caloric content of the Product described]
12. Pricing of the Product depends upon customer location and [...].
13. [...].
14. The Company is [...]
15. The Product is not a meal replacement, a nutritional supplement or a formulated liquid diet under the Food and Drug Regulations.
Ruling Requested
You would like to know how the GST/HST applies to supplies of the Product.
Ruling Given
Based on the facts set out above, we rule that supplies of the Product are taxable at the HST rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
Section 1 of Part III of Schedule VI to the ETA 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 one of the exclusions set out in paragraphs 1(a) through 1(r) applies.
The terms "food" and "beverage" are not defined in the ETA. However, for GST/HST purposes, the Canada Revenue Agency (CRA) considers 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. Consumers usually consume food and beverages to allay hunger or quench thirst, or for enjoyment rather than for therapeutic or preventative effects. Products that meet special dietary needs of certain segments of the population such as those with restricted or special purpose diets, high performance athletes and dieters may not necessarily be viewed as a food or beverage.
Products that are labelled and/or marketed for the consumption of certain ingredients (nutritive or otherwise), or products that place emphasis on perceived benefits of consumption (for example, therapeutic or preventative effects, or enhancing performance or physique) are not considered products that an average consumer would ordinarily purchase in the course of buying food or beverages. Products of this sort are considered dietary supplements and are consumed for actual or perceived health benefits. Therefore, these products would not be zero-rated basic groceries for the purposes of Part III of Schedule VI to the ETA.
Dietary Supplements
Memorandum 4.3 describes dietary supplements as; supplies consumed for their therapeutic or preventative effects, or to achieve specific beneficial effects related to performance or physique. Food and beverages are usually consumed by an average person to sustain or maintain life, to allay hunger or thirst, or for enjoyment. Products commonly referred to as dietary supplements are not considered to be basic groceries and are not within the scope of section 1 of Part III of Schedule VI.
Dietary supplements may be made from natural or synthetic ingredients and include products such as vitamins, minerals, tonics, fibre, protein, amino acids, fatty acids, enzymes, herbal supplements, or compounds derived from plant or animal products. Dietary supplements are available in various forms including, but not limited to, tablet, pill, capsule, powder, liquid, gel, wafer and concentrates.
Info Sheet GI-001 Products Commonly Described as Dietary Supplements
The following factors may indicate that a product is not a basic grocery item. The factors are not listed in any particular order and there is no intent to weigh one more heavily than another.
• The label or marketing material refers to the product as a "dietary supplement" or "supplement".
• The label or marketing material claims that the product has a therapeutic or preventive effect, enhances mental or physical performance or enhances physique.
• The label or marketing material emphasizes a particular nutrient that is not commonly regarded as an ingredient to basic groceries; for example, whey protein isolate or chlorophyll. The product may also emphasize the purity or source of the nutrient.
• The label or marketing material indicates the dosage size and how often the product should be taken. There may also be warnings advising certain people such as children or pregnant women not to take the product, or that the product is to be taken only as directed by a physician.
• The product has a Drug Identification Number (DIN), a Drug Identification Number - Homeopathic Medicine (DIN-HM), or a Natural Products Number (NPN).
• The product lists the active or medicinal ingredients.
• The product is compared to other products that are not considered a food, beverage or ingredient. For example, a product in powder form may be compared to a product in pill form.
• The label or marketing material focuses on the benefits to be derived from taking the product.
• The product is in a form not commonly associated with food, beverages or ingredients, for example, pills, capsules, tablets, gels, liquids in eyedropper bottles, fibres, wafers, powders and concentrates.
• In sales catalogues or stores, the product is not placed with products that are commonly recognized as foods, beverages or ingredients. The product may be placed with non-prescription drugs.
The Product has the following factors that are indicative of it being a dietary supplement: [...]
The Product does not label itself a dietary supplement, it labels itself as [...] that is to be taken during a fast, however in special circumstances it is stated that it can be taken as a supplement to a healthy diet. The special circumstances are where the product to be consumed by children or women who are pregnant. Since [...] is below the recommended daily intake of calories it is advised that the Product be used in conjunction with a healthy diet. In addition, those with diabetes or on medications are advised to consult first with their doctor.
The focus of the Product's marketing is that consumption of the Product has perceived therapeutic effects, enhances mental and physical performance amongst other benefits.
Products that qualify as formulated liquid diets, meal replacements, or nutritional supplements under the Food and Drug Act and Regulations are considered basic groceries for GST/HST purposes and are zero-rated under section 1 of Part III of Schedule VI. All supplies of formulated liquid diet, meal replacement and nutritional supplement products are zero-rated (except when sold from a vending machine). The product is not a formulated liquid diet, a meal replacement or a nutritional supplement under those regulations.
On balance, we conclude that the Product is a dietary supplement and the supplies of the Product are subject to the GST/HST at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories. Products that perform similar cleansing functions and are in different formats, such as pill or capsule format, are also considered dietary supplements and supplies of these products are also subject to the GST/HST.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-5124. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Angela Stachowski
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
Email this Content