12 November 2004 GST/HST Interpretation 54049 - Election under subparagraph 9(2)(b)(ii) of Part I of Schedule V to the Excise Tax Act ("the ETA")

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.

Dear XXXXX:

Thank you for your letter dated XXXXX (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of two XXXXX products, specifically XXXXX (Product A) and XXXXX (Product B).

Statement of Facts

Our understanding of the facts is as follows:

1. Your client, XXXXX, imports various products into Canada.

2. Products A and B are available in the following flavors: XXXXX.

3. Product A is marketed as XXXXX. The manufacturer claims that Product A is XXXXX.

4. The ingredients common to all flavors of Product A are: XXXXX.

5. In addition to the common ingredients each flavor of Product A also contains XXXXX.

6. Product A is available in a XXXXX g container. The format of Product A is XXXXX. XXXXX.

7. Product B labels state: XXXXX.

8. The ingredients common to all flavors of Product B are: XXXXX.

9. In addition to the common ingredients each flavor of Product B also contains XXXXX.

10. Product B is available in a XXXXX g bar format.

Ruling Requested

You have requested a ruling concerning the application of the GST/HST to the supply of Products A and B.

Ruling Given

Based on the facts set out above, we rule that the supply of Products A and B is subject to GST/HST at the rate of 7% or 15%, as applicable, pursuant to section 165 of the Excise Tax Act (ETA).

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 ETA, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Taxable supplies of goods and services made in Canada are generally subject to tax at 7% GST or 15% HST, as applicable. However, "zero-rated" supplies of goods and services are subject to tax at 0%. A zero-rated supply is any supply included in Schedule VI to the ETA.

Although section 1 of Part III of Schedule VI to the ETA makes no specific references to meal replacements and nutritional supplements, it is the position of the CRA that meal replacements and nutritional supplements are zero-rated as basic groceries.

It is understood by the CRA that products labeled as meal replacements or nutritional supplements must meet the requirements of both the Food and Drug Act and Regulations and the Consumer Packaging and Labeling Act. It is the position of the CRA that if a product is represented as being a meal replacement or nutritional supplement as evidenced by its label, then the CRA will accept this information as fact in determining its tax status. As Products A and B are not labeled as meal replacements or nutritional supplements, they therefore are not zero-rated.

Section 1 of Part III of Schedule VI to the ETA zero-rates supplies of food or beverages for human consumption and sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, unless one of the exclusions set out in paragraphs 1(a) through 1(r) applies.

Paragraph 1(l) excludes from zero-rating, supplies of:

"fruit bars, rolls or drops or similar fruit-based snack foods"

"Fruit-based" implies a mixture of fruit and at least one other ingredient. However, snack foods containing 100% fruit in the form of bars also fall within the scope of this provision.

As Products A and B are considered to be fruit based snack foods for the purposes of this provision, they are excluded from zero-rating by virtue of paragraph 1(l) and are therefore taxable at the rate of 7% GST or 15% HST, as applicable.

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,

Nicole Thomas, CMA
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2004/12/23 — RITS 54513 — XXXXX Bars and Beverages