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: 188571
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING Tax Status of […][food ingredient]
Thank you for your letter concerning the application of GST/HST to the supply of […][food ingredient](the Product). We apologize for the 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
1. […] (the Company) is a GST/HST registrant.
2. The Company supplies the Product online through the Company website […] and their telephone ordering service.
3. The Product comes in a powdered format and is derived from […].
4. The Product is used by culinary chefs for flavour infusion into food items such as dips, vinaigrettes, enhancers, sauces, chowders etc. It is described as […][product marketing information].
5. The description of the Product on the Company’s website indicates that the Product is a spice that is added to water or oil and is mixed in with food.
6. The Company has represented the supply of the Product as a supply of a natural food product or a whole food for human consumption.
7. The Product is supplied in […] gram bottles and bags that contain […] grams, […] grams, and […] grams.
8. The Product marketing indicates that the Product is a natural product that is rich in essential minerals such as […]. It also indicates that the Product contains omega 3 and 6 fatty acids, and high levels of vitamin B12, C and E. The Product is marketed as a plentiful source of antioxidants.
9. The Company is marketing the Product to high end culinary chefs and restaurants. In the future, the Product may be available for purchase from health food and natural food retailers.
RULING REQUESTED
Is the supply of the Product zero-rated under section 1 of Part III of Schedule VI?
RULING GIVEN
Based on the facts set out above, we rule that the supply of the Product is zero-rated under section 1 of Part III of Schedule VI. The Product is an ingredient, the supply of which is not excluded from zero-rating by any of the paragraphs (a) to (r) in that section.
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%. 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 to be mixed with or used in the preparation of such food or beverages, other than supplies included in paragraphs (a) to (r) of that section.
The terms “food” and “beverage” are not defined in the ETA. As stated in paragraph 2 of the GST/HST Memoranda Series 4.3, Basic Groceries, we consider a product to be a food or beverage if an average consumer would recognize and purchase the product as such in the ordinary course of buying basic groceries.
The term “ingredient” is also not defined in the ETA. Generally, our view is that an average consumer would consider a product to be an ingredient if the product is added to enhance 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, must be a food or beverage.
With respect to the Product, it is advertised and marketed as a flavour enhancer or spice. The primary use of the Product is to impart taste to food in which it is added. The Product is used and supplied as an ingredient. The supply of the Product is zero-rated under section 1 of Part III of Schedule VI as none of the exclusionary paragraphs (a) to (r) under section 1 of Part III of Schedule VI apply.
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 905-721-5184. 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,
Siraj Patel, CGA, CPA
Basic Groceries and Recaptured Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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