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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
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XXXXX
XXXXX
XXXXX
XXXXXXXXXX
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Case Number: 44087June 3rd, 2003
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Subject:
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GST/HST APPLICATION RULING
XXXXX
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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
a. XXXXX
b. XXXXX
c. XXXXX
d. XXXXX
e. XXXXX
4. XXXXX
a. XXXXX
b. XXXXX
c. XXXXX
d. XXXXX
e. XXXXX
f. XXXXX
5. XXXXX
a. XXXXX
b. XXXXX
c. XXXXX
d. XXXXX
e. XXXXX
6. XXXXX
a. XXXXX
b. XXXXX
c. XXXXX
d. XXXXX
e. XXXXX
7. XXXXX
a. XXXXX
b. XXXXX
c. XXXXX
d. XXXXX
e. XXXXX
8. XXXXX
a. XXXXX
b. XXXXX
c. XXXXX
d. XXXXX
9. XXXXX
a. XXXXX
b. XXXXX
c. XXXXX
d. XXXXX
e. XXXXX
10. XXXXX
a. XXXXX
b. XXXXX
c. XXXXX
d. XXXXX
e. XXXXX
11. XXXXX
a. XXXXX
b. XXXXX
c. XXXXX
d. XXXXX
e. XXXXX
12. XXXXX
13. XXXXX
Ruling Requested
You have requested a ruling concerning the application of GST/HST to the supply of the above-mentioned Products.
Ruling Given
Based on the facts set out above, we rule the following:
1. The Products do not fall under the zero-rating provision in section 1 of Part III of Schedule VI to the Excise Tax Act ("ETA") and the supply of these products is taxable at a rate of 7% GST or 15% HST as applicable pursuant to subsection 165(1) of the ETA.
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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).
The term 'beverage' is not defined in the ETA. The CCRA position is that this term is to be construed according to its ordinary meaning. That is, a beverage is a good that an average consumer would recognize and purchase as a beverage in the ordinary course of buying basic groceries. 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 beverage.
Consumers usually consume beverages for enjoyment or to quench thirst. Therefore, the CCRA generally considers 'beverages' as goods consumed to sustain or maintain life, to allay thirst, or for enjoyment rather than for therapeutic or preventative effects or to achieve specific beneficial effects related to performance or physique.
Products that are labelled or marketed as products to be consumed to facilitate the intake of certain ingredients (nutritive or otherwise) or which place an emphasis on claims relating to the benefits of the product, for example, therapeutic or preventative effects, or enhancing performance or physique, are not considered to be products that an average consumer would ordinarily purchase in the course of buying beverages. Rather, these products are represented as being for another purpose and so are not considered to be basic groceries.
There are a number of factors that the CCRA considers in determining whether a product would be considered to be a food, beverage or ingredient.
Products that emphasize the purity or superior quality of a particular nutrient and relate that nutrient to a therapeutic or beneficial health effect or enhanced mental or physical performance are consumed for that purpose and not as a food, beverage or ingredient.
Directions for use or restrictions relating to the amount to be consumed are generally not characteristics of products that the average consumer would consider to be a food, beverage or ingredient. Such directions or restrictions indicate that the product is being consumed for a purpose other than as a food, beverage or ingredient.
The Products have been marketed as products that offer therapeutic or preventative effects. According to P-240: Application of GST/HST to Products Commonly Described as "Dietary Supplements", such marketing is a contributing factor indicating that the Products are not beverages.
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In addition to the above general health benefit that all of the Products claim, each individual product also claims to have particular beneficial effects not shared by some or all of the others:
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Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 952-9585.
Yours truly,
Cliff Lee
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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