26 March 2003 GST/HST Interpretation 44388 - Application of GST/HST to Soy Drinks

Dear XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of XXXXX soy drinks.

You have submitted for our review, the label information for the XXXXX, XXXXX flavours of the XXXXX soy product. The label identifies the products as XXXXX. The principal ingredients of the soy products as denoted by order of appearance on the labels are: XXXXX soymilk XXXXX, XXXXX cane juice crystals, and organic fruit XXXXX. The product which is packaged for sale in a 355 ml container, is promoted as a "XXXXX soy drink" and is available in the fruit flavours identified above.

Interpretation Requested

What is the tax status of the XXXXX soy drinks?

Interpretation Given

Section 1 of Part III of Schedule VI to the Excise Tax Act (ETA) 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 supplies described in paragraphs (a) to (r) of that section.

Paragraph 1(d), excludes from zero-rating, 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.

Therefore, if the percentage of natural fruit juice or combination of natural fruit juices in the XXXXX soy drink are less than 25% by volume, the supply of the XXXXX soy drinks will be taxable.

However, if you determine that the XXXXX soy drinks contain 25% or more by volume of the juices referred to in subparagraphs 1(d)(i) or (ii) above, paragraph 1(d) will not apply to exclude the supply of the soy drink from the general zero-rating provision of section 1, but paragraph 1(n) may apply.

Paragraph 1(n) excludes from zero-rating, supplies of beverages (other than unflavoured milk) or pudding, including flavoured gelatine, mousse, flavoured whipped dessert product or any other products similar to pudding, except

(i) when prepared and pre-packaged specifically for consumption by babies,

(ii) when sold in multiples, pre-packaged by the manufacturer or producer, of single servings, or

(iii) when the cans, bottles or other primary containers in which the beverages or products are sold contain a quantity exceeding a single serving;

In essence, unless the XXXXX soy drinks are prepared and pre-packaged specifically for babies, sold in multiples (pre-packaged by the manufacturer or producer) of single servings, or the can, bottle or the primary container in which the drinks are sold contain a quantity exceeding a single serving, supplies of the drinks would be excluded from section 1 by virtue of paragraph 1(n). Since no other relieving provision would apply in this case, supplies of such drinks would be taxable.

Note that for the purpose of paragraph 1(n), the Canada Customs and Revenue Agency generally regards a beverage sold in a primary beverage container containing less than 600 ml of the beverage as a single serving.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-8530.

Yours truly,

Dwayne Moore
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate