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, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 184240
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
[…][X Brand] powders
Thank you for your letter of April 28, 2017, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to […][Powder A], […][Powder B], […][Powder C] and […][Powder D] [Products]. We apologize for our delay in responding.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand the following facts:
1. […] (the Company) sells four powder products which are manufactured by […] (the Manufacturer).
2. The following are descriptions of the products:
[Powder A]
- The product is packaged, by the manufacturer, in a re-sealable […]kg package.
- The product is shelved in the baking ingredients section of the Company.
- The product’s ingredients are: […] Psyllium[…].
- The product is labeled as […][nutritional content].
- The manufacturer’s website ([…]) markets the product with the following statement:
[…].
- The website states an advisory – […] [instructions for consumption]
- Other representations on the website include:
[…] excellent source of fibre”. […][ health claims by the manufacturer].
[Powder B]
- The product is packaged, by the manufacturer, in a re-sealable […]kg package.
- The product is shelved in the baking ingredients section of the Company.
- The product’s ingredients are: […].
- The product is labeled as […][health claims by the manufacturer].
- The manufacturer’s website markets the product with the following statement:
[…][product description and nutritional content including vitamins and minerals].
[Powder C]
- The product is packaged, by the manufacturer, in a re-sealable […]kg package.
- The product is shelved in the baking ingredients section of the Company.
- The product’s ingredients are: […].
- The product is labeled as […][health claims by the manufacturer].
[Powder D]
- The product is packaged, by the manufacturer, in a re-sealable […]kg package.
- The product is shelved in the baking ingredients section of the Company.
- The product’s ingredients are: […].
- The product is labeled as […][health claims by the manufacturer].
- The manufacturer’s website markets the product with the following statements: (in part)
“…This paleo flour […][product description and alternative ways to use Powder D when baking].
3. Based on the information on the website, the manufacturer packages the products in various sizes for the purposes of sale.
RULING REQUESTED
You would like to know the tax status of the powder products [Powder D], [Powder A], [Powder C], and [Powder B], […]?
RULING GIVEN
Based on the facts set out above, we rule that the [Powder A], [Powder B], and [Powder C] are considered dietary supplements, and are subject to the GST/HST at the applicable rate.
[Powder D] is a zero-rated product, as it is considered to be an ingredient used in the preparation of food.
EXPLANATION
Pursuant to subsection 165(1), every recipient of a taxable supply (other than a zero-rated supply) made in Canada shall pay tax in respect of the supply calculated at the rate of 5% on the value of the consideration for the supply. Pursuant to subsection 165(2), every recipient of a taxable supply (other than a zero-rated supply) made in a participating province shall pay in addition to the tax imposed by subsection 165(1), tax in respect of the supply calculated at the rate of tax for that province (i.e., the provincial part of the HST), on the value of the consideration for the supply.
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 to be mixed with or used in the preparation of such food or beverages), unless an exclusion set out in paragraph 1(a) through 1(r) of that section applies.
Products that are labelled and/or marketed for the consumption of certain ingredients (nutritive or otherwise), or products that place emphasis on the perceived benefits of consumption (e.g. therapeutic or preventative effects, or enhancing performance or physique) are not considered products that an average consumer would ordinarily purchase in the course of buying food or beverages. Products of this sort are considered dietary supplements, and are consumed for actual or perceived health benefits. These products would not be zero-rated basic groceries under of section 1 of Part III of Schedule VI.
CRA publications GI-01, Products Commonly Described as Dietary Supplements, and GST/HST Memoranda Series 4.3, Basic Groceries, outline the criteria the CRA considers in determining whether a product is a food, beverage or ingredient for human consumption or a dietary supplement. The criteria includes a product's labelling, packaging/format and marketing.
The following factors as listed in GI-01, Products Commonly Described as Dietary Supplements, are criteria that indicate a particular product is not a basic grocery item.
- The label or marketing material refers to the product as a “dietary supplement” or “supplement”.
- The label or marketing material claims that the product has a therapeutic or preventive effect, enhances mental or physical performance, or enhances physique.
- The label or marketing material emphasizes a particular nutrient that is not commonly regarded as an ingredient to basic groceries; for example, whey protein isolate or chlorophyll.
- The product may also emphasize the purity or source of the nutrient.
- The label or marketing material indicates a dosage size and how often the product should be taken. There may also be warnings advising certain people such as children or pregnant women not to take the product, or that the product is to be taken only as directed by a physician.
- The product has a Drug Identification Number (DIN), a Drug Identification Number Homeopathic Medicine (DIN-HM), or a Natural Products Number (NPN).
- The product lists the active or medicinal ingredients.
- The product is compared to other products that are not considered to be food, beverage or ingredient. For example, a product in powder form may be compared to a product in pill form.
- The label or marketing material focuses on the benefits to be derived from taking the product.
- The product is in a form not commonly associated with food, beverages or ingredients, for example, pills, capsules, tablets, gels, liquids in eye-dropper bottles, fibres, wafers, powders and concentrates.
- In sales catalogues or stores, the product is not placed with products that are commonly recognized as foods, beverages or ingredients. The product may be placed with non-prescription drugs.
Products that are consumed for the primary purpose of providing beneficial effects to the body do not fall within the meaning of “food” or “beverage”, irrespective of whether the products may be ingested into the body by way of eating or drinking or whether the products are sold in a powder or liquid form. Accordingly, as the [Powder A], [Powder B], and [Powder C] are marketed and sold primarily for their health benefits, namely, to provide a boost of vitamins, minerals, fibre, and/or protein, these products would not be considered “food” or “beverage” and therefore would be subject to HST at the full rate.
Based on our understanding of facts, the [Powder D] serves as a replacement for flour called for in recipes and provides texture and a […] flavour to baked goods. As such, the CRA considers the [Powder D] to be an ingredient used in the preparation of food and is therefore, zero-rated.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-721-5081. 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,
Peter Pushkarna
Basic Groceries & Recapture Input Tax Credits Unit
General Operations & Border Issues Division
Excise and GST/HST Rulings Directorate
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