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.
XXXXX
XXXXX
XXXXX
XXXXX
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 122786
Business Number: XXXXX
June 28, 2010
Dear XXXXX:
Subject:
GST/HST RULING
XXXXX
Thank you for your letter of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX (the Products).
HST currently applies at the rate of 13% in Nova Scotia, New Brunswick, and Newfoundland and Labrador. Effective July 1, 2010, HST will apply at the rate of 15% in Nova Scotia, 13% in New Brunswick, Newfoundland and Labrador, and Ontario, and 12% in British Columbia. GST will continue to apply at the rate of 5% in the remaining provinces and territories
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
Our understanding of the facts is as follows:
1. You are requesting a ruling on behalf of your client XXXXX, which is a company located in XXXXX, that imports the Products into Canada. XXXXX has been assigned Business Number XXXXX.
2. In XXXXX you requested a ruling on the Products from the XXXXX GST/HST Rulings Centre. You received the ruling in XXXXX that supplies of the Products are subject to GST at 5% as they are excluded from zero-rating by paragraph 1(h) of Part III of Schedule VI. The letter went on to state that supplies of the Products may also be excluded under paragraphs 1(e) or (l) and explained these provisions.
3. The ruling provided in XXXXX was based upon XXXXX sample Products, ingredients and packaging. The Products now have Canadian packaging and you are therefore requesting a ruling on the Canadian samples and packaging.
4. You state in your submission that prior to XXXXX importing the Products into Canada, Canadian retailers imported the Products into Canada with the XXXXX packaging and sold the Products as meal replacement bars. XXXXX.
5. You state, that since the above ruling was received, XXXXX has been sold in Canada in the new Canadian packaging. The Products are designed to be meal replacements and continue to be marketed this way to retailers.
6. You initially provided the XXXXX and the Canadian Product samples and packaging for XXXXX flavours and in a XXXXX submission included a further XXXXX Canadian samples. A complete listing of the Products follows, using the information from the Canadian packaging of the Products.
7. The packaging is made of a XXXXX. All labels are XXXXX. The front of the packaging for all Products contains the name of the Product and the wording XXXXX. XXXXX of the Products contain the additional wording XXXXX. The back of each package contains the Nutrition Facts for the specific Product and XXXXX. All labelling is in both English and French.
8. The ingredients for XXXXX (Product A) are XXXXX.
9. The ingredients for XXXXX (Product B) are XXXXX.
10. The ingredients for XXXXX (Product C) are XXXXX.
11. The ingredients for XXXXX (Product D) are XXXXX.
12. The ingredients for XXXXX (Product E) are XXXXX.
13. The ingredients for XXXXX (Product F) are XXXXX.
14. The ingredients for XXXXX (Product G) are XXXXX.
15. The ingredients for XXXXX (Product H) are XXXXX.
16. The ingredients for XXXXX (Product I) are XXXXX.
17. The ingredients for XXXXX (Product J) are XXXXX.
18. The Nutrition Facts per 1 bar for each Product are on the back of each package. The nutrition amounts for all of the Products are similar and following is the range indicating the XXXXX and XXXXX amounts for the Products:
XXXXX
XXXXX
XXXXX
19. With your submission, you also included a promotional poster for the Products which shows a picture of one of the Products XXXXX and contains the following wording:
XXXXX
XXXXX
XXXXX
20. The submission also included a marketing page that showed awards that the Products have won and XXXXX magazines which have featured the Products. XXXXX:
XXXXX
XXXXX
21. With your second submission you included copies of XXXXX ads for the Products. XXXXX:
• XXXXX.
• XXXXX.
22. The web site for the Products (www. theprobar.com) was reviewed. This site had a brief description of each of the Product flavours. A description of those not included in bullet 21 above is as follows:
• XXXXX.
• XXXXX.
23. There are XXXXX different XXXXX product types listed on the web site as follows:
• XXXXX.
• XXXXX.
24. The individual Product labelling for each variety does not state that it is a "meal replacement" or "nutritional supplement".
25. The Products are not sold primarily as breakfast cereals.
26. The sample Products were opened and tasted. All products appeared somewhat similar to a traditional granola bar, with the individual ingredients identifiable XXXXX. XXXXX.
Ruling Requested
You would like to know whether supplies of the Products are zero-rated under section 1 of Part III of Schedule VI as meal replacement products.
Ruling Given
Based on the facts set out above, we rule that supplies of the Products are taxable at 5% GST or 13% HST pursuant to section 165.
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 tax calculated at the rate of 5% on the value of the consideration for the supply (13% in the participating provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador) unless the supply is zero-rated, pursuant to subsection 165(3). The tax rate in respect of a zero-rated supply that is included in Schedule VI is 0%.
Under Part III of Schedule VI, certain supplies of basic groceries are zero-rated. Section 1 of Part III of Schedule VI 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.
Products that qualify and are labeled as "nutritional supplements" or "meal replacements" pursuant to the Food and Drugs Act and Regulations are considered food or beverages for purposes of section 1 of Part III of Schedule VI. Moreover, they are not subject to the exclusions under paragraphs 1(a) to 1(r) of Part III and, therefore, are zero-rated. In addition, if a product is represented as being a meal replacement or nutritional supplement as evidenced by the label, the Canada Revenue Agency will accept this information as fact in determining its tax status.
The Food and Drug Regulations set out the conditions related to energy and essential nutrients that must be met for products to qualify as nutritional supplements and meal replacements. The products must provide a minimum calorie content, meet specific protein and fat guidelines and they must contain the quantities of vitamins and minerals as listed in the Regulations for nutritional supplements or meal replacements, within certain minimal and maximal ranges.
Although some of the promotional material you submitted refers to the Products as meal replacements, the Products' labels themselves do not advertise them as either meal replacements or nutritional supplements. This indicates that the Products do not meet the requirements, outlined in the Food and Drug Regulations, to be considered either meal replacements or nutritional supplements.
Under paragraph 1(h) of Part III of Schedule VI, the following products are excluded from
zero-rating:
"granola products, but not including any product that is sold primarily as a breakfast cereal."
Granola products may be sold loose or pressed into bars. Granola bars generally have a mixture of cereals (e.g., rolled oats, rice or other whole grains) and honey and/or syrup as the main ingredients, and may include nuts and fruit. The ingredients in granola bars are not processed to a great extent, and the distinct character of each ingredient is retained. Granola bars may have a chocolate or sweetened coating.
Based upon the Products' composition, a number of the flavours are considered to be a granola product. As the Products are considered to be a granola product that is not sold primarily as a breakfast cereal, they fall under the exclusion pursuant to paragraph 1(h) of Part III of Schedule VI, and are taxable at 5% GST or 13% HST, as applicable. The specific Products which will be excluded from zero-rating under this paragraph are:
• Product A - XXXXX
• Product E - XXXXX
• Product G - XXXXX
• Product H - XXXXX
• Product I - XXXXX
Paragraph 1(l) of Part III of Schedule VI excludes supplies of "fruit bars, rolls or drops or similar fruit-based snack foods" from zero-rating. GST/HST Info Sheet GI-020, Bars, states that fruit bars include bars that are 100% fruit such as fruit leathers as well as bars that have fruit as a significant ingredient. Fruit bars may include fruit in combination with vegetables, grains, nuts or seeds. A bar that has fruit flavouring may also be considered to fall within this category.
As a number of the Products have fruit as a significant ingredient and the marketing of the Products emphasises the fruit content, these Products will be excluded from zero-rating by paragraph 1(l) of Part III of Schedule VI. The specific Products which will be excluded by this paragraph are:
• Product B - XXXXX
• Product C - XXXXX
• Product D - XXXXX
• Product F - XXXXX
• Project J - XXXXX
As supplies of the Products are excluded by either paragraph 1(h) or 1(l) of Part III of Schedule VI, supplies of the Products are taxable at 5% GST or 13% HST, as applicable.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (902) 426-6940. 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,
Nancy Jardine
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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