7 June 1996 GST/HST Interpretation 11850-1[1] - A Ruling on the Application of the Goods and Services Tax to the Supply of Grape Juice Mixed with Yeast and Dextrose for Making Wine When Packaged in Certain Packaging Materials

Dear XXXXX

This is in response to your letter of January 19, 1996, in which you requested, on behalf of your client, XXXXX, a ruling on the application of the Goods and Services Tax (GST) to the supply of grape juice mixed with yeast and dextrose for making wine when packaged in certain packaging materials. We apologize for the delay in responding to your request.

Facts

1. Your client is understood to supply ingredients to make wine in the following manner: XXXXX litres of grape juice are mixed with yeast and dextrose and packaged in a plastic bag which is placed within a plastic bucket or pail. The bag contains XXXXX valves which, when hooked up to holes in the bucket wall, is opened to allow air in. This introduction of air begins the fermentation process. The valves are also used to vent carbon dioxide (the top valve) or to drain the resulting wine (the lower valve or nozzle).

2. Our XXXXX District Office has advised you that the above packaging is not considered to be a usual covering or usual container for the purposes of section 137 of the Excise Tax Act (ETA) and that since the value of the packaging is considered significant in relation to the value of the entire supply, the packaging is not considered to be incidental for the purposes of section 138 of the ETA. You were advised that the supply is considered a single supply taxable at 7%.

Ruling Requested

1. You have requested a ruling on the application of the GST when the upper valve is removed from the bag in the wine making kit and supplied separately.

2. You have also requested a ruling on the application of the GST when both the upper valve and lower nozzle are removed from the wine making kit and supplied separately.

Response

We have reviewed your case and reconsidered the GST consequences.

Your packaging materials are considered to be usual for purposes of section 137. As a usual covering or container for this class of goods, the covering or container is deemed to form part of the supply of ingredients for making wine. Ingredients for making wine are zero-rated for GST purposes. Therefore the supply is zero-rated. We apologize for any inconvenience this may have caused.

This ruling is given subject to the general limitations and qualifications outlined in the GST Memorandum Series 1.4. We are bound by this ruling provided that none of the above issues are presently under audit, objection or appeal, there are no relevant changes in the future to the Excise Tax Act and provided that you have described all necessary facts and transactions for which you requested a ruling.

If you would like to discuss this matter further, please contact Ken Syer, A/Senior Policy Officer, at (613) 952-9590.

Yours truly,

J.A. Venne
Director
Special Sectors
GST Rulings and interpretations
Policy and Legislation Branch

c.c.:      M. Brulé

XXXXX XXXXX
11865-17(lgd)
C.N.: 2714