Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
XXXXX
Attention: XXXXX
XXXXX
Case Number: 109576
Business Number: XXXXX
November 21, 2008
Dear XXXXX:
Subject:
GST/HST RULING
XXXXX
Thank you for your XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to sales of XXXXX (the Product).
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
We understand the facts to be as follows:
1. The Product is labelled as XXXXX.
2. The ingredients are XXXXX.
3. The Product is packaged in a XXXXX.
4. The Product label contains the descriptions XXXXX.
5. The label states: XXXXX.
6. The Directions state: XXXXX
7. The label contains a caution that states: XXXXX
8. The Product is classified in the XXXXX as "Antacids & Antiflatulents".
Ruling Requested
You would like to know how the GST/HST applies to supplies of the Product.
Ruling Given
Based on the facts set out above, we rule that supplies of the Product are taxable at 5% GST or 13% HST.
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, 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 5% or the HST rate of 13% on the value of the consideration for the supply. Where a supply is a zero-rated supply, the tax rate in respect of that supply is 0%.
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 to be mixed with or used in the preparation of such foods or beverages), unless one of the exceptions set out in paragraphs 1(a) through 1(r) applies.
The terms "food", "beverage" and "ingredient" are not defined in the ETA. The position of the Canada Revenue Agency (CRA) is that these terms are to be construed according to their ordinary meaning. That is, a food or a beverage is a product that an average consumer would recognize and purchase as such in the ordinary course of buying basic groceries, and an ingredient is a product that an average consumer would recognize as an ingredient into a food or a beverage. Thus, it is not the views of individuals or persons with special dietary concerns or requirements that will determine whether a product would be considered to be an ingredient.
Generally, it is the view of the CRA that an average consumer would consider a product to be an ingredient if the product added to the flavour, texture or appearance of the final product; that is, if it was integral to the final product. Moreover, in order to be regarded as an ingredient to a food or beverage, the final product, in and of itself, would be considered to be a food or beverage by the average consumer.
Furthermore, it is the CRA's view that products that are consumed for their therapeutic, preventative, or performance or physique enhancing properties would not be recognized by an average consumer as ingredients.
The Product is not an ingredient as it does not meet these criteria, it would not be recognized as such by an average consumer and it does not add to the flavour, texture or appearance of the final product.
Among other factors, the CRA will consider labelling, packaging and marketing to determine whether a product would be considered a "food", "beverage", or "ingredient".
The Product's label states that it makes XXXXX easier to digest, and emphasizes XXXXX. The Product's name and labelling also emphasizes that the principal purpose for consuming the Product is for its therapeutic or preventive effect. XXXXX.
The Product XXXXX
In conclusion, the Product would not be considered a food, beverage or ingredient, and therefore would not fall within the preamble to section 1 of Part III of Schedule VI to the ETA.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-957-8253. 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,
Gunar Ozols
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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