Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 157361
Business Number: […]
January 21, 2014
Dear [Client]:
Subject: GST/HST RULING
Tax Status of […][pudding]
Thank you for your letter of September 30, 2013, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of […][pudding] (the Product) in shipping cartons of […][more than 6] units.
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island (effective April 1, 2013) and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
From your letter and the sample of the Product provided, our understanding of the facts is as follows:
1. […] (the Company) is a GST/HST registrant.
2. […][Brand name of the Product].
3. The Company produces and packages the Product in […] […] grams […][containers] sealed with […] covers.
4. The […] cover for the Product contains a universal product code (UPC) for scanning and a listing of the ingredients.
5. The Company only supplies the Product to foodservice customers in corrugated cardboard shipping cartons each containing [more than 6] loose and unattached units.
6. Samples of the Product including the shipping carton have been provided.
7. The outside of the shipping carton identifies the name of the Company and the Product. It also contains the UPC code, the nutrition facts, and a listing of the ingredients for the Product.
8. Words such as “[…]” and “[…]” are printed on the outside of the shipping carton.
9. You stated that you cannot control how your foodservice customers resell the Product.
10. You believe the Product is not zero-rated as the Product is packaged for sale to consumers in single servings, notwithstanding the fact that the Product is made available in cartons of [more than 6] units.
RULING REQUESTED
You would like confirmation of the tax status of the Product which is supplied to foodservice companies in shipping cartons of [more than 6] units.
RULING GIVEN
Based on the facts set out above, we rule that the Company’s supplies of the Product in shipping cartons of [more than 6] units are zero-rated under section 1 of Part III of Schedule VI to the ETA and that none of the exclusions in that section apply in respect of these supplies.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
EXPLANATION
Generally, in accordance with section 165, every recipient of a taxable supply made in Canada is required to pay GST/HST on the value of the consideration for the supply. Zero-rated supplies (listed in Schedule VI to the ETA) are subject to the GST/HST at the rate of 0% and exempt supplies (listed in Schedule V to the ETA) are not subject to the GST/HST.
Section 1 of Part III of Schedule VI to the ETA zero-rates supplies of food or beverages for human consumption, including sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, other than supplies included in paragraphs (a) to (r) of that section.
Paragraph 1(n) of Part III of Schedule VI to the ETA excludes from zero-rating:
“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 prepackaged specially for consumption by babies,
(ii) when sold in multiples, prepackaged 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.”
A single serving for puddings and similar products includes all servings weighing less than 425 grams.
As the Company supplies the Product in prepackaged shipping cartons of [more than 6] single servings, these supplies fall within the exception in subparagraph 1(n)(ii) of Part III of Schedule VI to the ETA. There is no requirement that the manufacturer’s or producer’s package be “packaged for sale to consumers”. Since none of the exclusions in paragraphs 1(a) to (r) of section 1 of Part III of Schedule VI to the ETA apply to supplies of the Product sold in prepackaged shipping cartons of [more than 6] single servings, these supplies are zero-rated.
However, where the shipping carton is broken open and single servings of the Product are supplied individually from the carton, the supply of the individual single servings would be excluded from zero-rating under paragraph 1(n) of section 1 of Part III of Schedule VI to the ETA and would be subject to GST/HST at the applicable rates according to subsections 165(1) and 165(2) and the place of supply rules. The supply of a portion of the carton would also be subject to the GST/HST.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-721-5217. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Denise Chan
Basic Groceries and Point-of-Sale Rebates Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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