2 March 2001 GST/HST Ruling 6238 - Powdered Drink Mix

Dear XXXXX

This is in reply to a letter of XXXXX, from XXXXX of your firm which was sent to our office in XXXXX. XXXXX inquiry has been transferred to our office in Ottawa for direct reply. The inquiry concerned the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX a powdered drink mix. Our comments are set out below.

Please accept our apologies for the delay in responding to your letter.

Statement of Facts

Our understanding of the facts of this case are as follows:

1. Your client, a GST/HST registrant, XXXXX ("the company") sells a XXXXX flavoured powdered drink mix called XXXXX ("the product").

2. The product is marketed as an XXXXX for body builders, weight lifters, and other strength and endurance athletes. It contains a XXXXX XXXXX which maximizes recovery following regular training or competition. The advertising for this product indicates that it is formulated to maximize the results of a workout by helping create an optimum anabolic body building response to exercise. This can result in increased muscle mass, greater strength and faster energy return.

3. The directions on the label recommend the following ways to mix the powder to form a drink for consumption after a workout:

•   mix 60 grams (1/2 cup) of the product with 250 ml (1 cup) of cold low fat skim or whole milk, or

•   for a XXXXX, mix 65 grams (3/4 cup) of the product with 250 ml (1 cup) of cold water or juice, or

•   for variety, blend the product with XXXXX.

4. The company envisions the product as a milk-based product. Even though the label indicates that the product could be mixed with fruit juice or water, the company views this as merely a suggestion for those who would not be able to mix the product with milk. The lactose-free option of mixing the product with water or juice is not the primary use of the product. The company does not have any confirmation that the product is actually mixed with water or fruit juice.

5. The XXXXX TIS office of the Canada Customs and Revenue Agency ("CCRA") issued an interpretation on the product to the company, dated XXXXX XXXXX. The interpretation stated that the product was a zero-rated milk based beverage. Based on this, the company supplied the product on a zero-rated basis.

6. XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX.

7. XXXXX XXXXX[.]

Ruling Requested

That the supply of the product is zero-rated, pursuant to section 1 of Part III of Schedule VI to the Excise Tax Act ("the Act").

Ruling Given

Based on the facts set out above, we rule that the supply of the product, is taxable at the rate of 7% GST or 15% HST, as applicable, pursuant to paragraph 1(d) of Part III of Schedule VI to the Act ("paragraph 1(d)").

Explanation

Section 1 of Part III of Schedule VI to the Act states that supplies of food or beverages for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or to be used in the preparation of such food or beverages) are zero-rated, except for the supplies indicated in paragraphs (a) to (r) of that section.

Paragraph 1(d) excludes non-carbonated fruit juice beverages or fruit flavoured beverages, other than milk based beverages, that contain less than 25% by volume of

(i) a natural fruit juice or combination of natural fruit juices, or

(ii) a natural fruit juice or combination of natural fruit juices that have been reconstituted into the original state, or goods that, when added to water, produce a beverage included in this paragraph.

Review of the material submitted leads us to conclude that the product is excluded from zero-rating pursuant to paragraph 1(d). When mixed with water or fruit juice, the product is a non-carbonated fruit flavoured beverage that contains less than 25% by volume of natural fruit juice.

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 transactions for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9585.

Yours truly,

Pauline Greenblatt
Technical Analyst
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate