13 March 2007 GST/HST Ruling 87992 - Importations of Vitamin B12 XXXXX and Vitamin B12 XXXXX

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX concerning the recent version of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) publication GST/HST Memoranda Series 4.3, Basic Groceries.

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

We understand XXXXX have noted changes in the recent GST/HST Memoranda Series 4.3 and have requested clarification.

Interpretations Requested

1. You would like clarification of the Canada Revenue Agency's (CRA) position regarding yoghurt beverages and whether they are considered milk-based beverages.

2. You would like to know whether the CRA no longer considers meringue nests as part of the candies category.

Interpretations Given

Interpretation #1

Paragraph 1(d) of Part III of Schedule VI excludes from zero-rating certain fruit juice or fruit-flavoured beverages, other than milk-based beverages. Paragraph 20 of GST/HST Memoranda Series 4.3 states that the term milk-based is not defined in the ETA. A product will qualify as milk-based if it has milk as a main ingredient. Milk is considered to be whole, skimmed and partly skimmed milk.

Milk is composed of several components, including water, fats, proteins, carbohydrates, vitamins and minerals. Milk solids, for example, are all the components of milk excluding water. The components of milk may be separated and used as ingredients in preparing foods and beverages. Such ingredients may be derived from milk, but are not considered to be milk. A beverage that contains a component of milk as a main ingredient is not a milk-based beverage.

Drinkable yoghurts are considered beverages. Where a drinkable yoghurt product has milk as a main ingredient (for example, skim milk) the product is considered by the CRA to be a milk-based beverage. As such, paragraph 1(d) of Part III of Schedule VI would not apply to such beverages.

Paragraph 1(n) of Part III of Schedule VI provides that beverages are excluded from zero-rating except when prepared and prepackaged specially for consumption by babies; when sold in multiples, prepackaged by the manufacturer or producer, of single servings; or when cans, bottles or other primary containers in which the beverages or products are sold contain a quantity exceeding a single serving.

Therefore, sales of drinkable yoghurts that are milk-based beverages in single servings are taxable supplies at the rate of 6% GST or 14% HST, as applicable. Sales of drinkable yoghurts (regardless of whether they are fruit flavoured or not) in multiples of single servings prepackaged by the manufacturer or producer are zero-rated.

Please note that we will be updating the GST/HST Memoranda Series 4.3 to clarify our position with respect to drinkable yoghurts.

Interpretation #2

The CRA is currently reviewing its position regarding the tax status of meringue nests. You are welcome to provide us with any comments you have either in support of meringue nests being a zero-rated basic grocery item under section 1 of Part III of Schedule VI or in support of meringue nests being excluded from zero-rating under one of paragraphs (a) to (r) of that section.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-5124.

Yours truly,

Cheryl McKenzie
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/02/01 — RITS 62393 — Application of GST/HST to Brokering of Physical Commodities