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, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 167670
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Application of GST/HST to […][X Fruit Bars]
Thank you for your [correspondence] of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supplies of […][X Fruit Bars] (the Product). Samples of the Product […][in 3 flavours] were sent for our review. We apologize for the delay in replying.
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The Government of New Brunswick has proposed to increase the rate of the HST in that province from 13% to 15%, effective July 1, 2016. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (the ETA) unless otherwise specified.
STATEMENT OF FACTS
1. We understand that you are registered for GST/HST purposes, operating under […][Company name].
2. The Product consists of individually wrapped bars which are sold individually or in pre-packaged bags of 6 servings, as “6-packs”, to […] stores in […][Province X].
3. The ingredients of the Product are as follows: […]
4. The Product has a soft and chewy texture and is shaped into a rectangular bar.
5. […].
6. The Product is not baked. […].
7. You stated the composition of the Product to be: […]
8. […].
RULING REQUESTED
You would like to know:
1. Are supplies of the Product zero-rated as basic groceries under section 1 of Part III of Schedule VI?
2. If supplies of the Product are packaged in groups of six bars, do they meet the criteria as zero-rated pre-packed units, as described in paragraph 96 of the GST/HST Memoranda Series 4.3, Basic Groceries?
RULING GIVEN
Based on the facts set out above, we rule that:
1. Supplies of the Product are not zero-rated under section 1 of Part III of Schedule VI.
2. Supplies of the Product sold in prepackaged groups of 6 bars do not meet the criteria as zero-rated pre-packed units, as described in paragraph 96 of GST/HST Memoranda Series 4.3, Basic Groceries.
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 (or 15% in Nova Scotia, 14% in Prince Edward Island, 13% in Ontario, New Brunswick, Newfoundland and Labrador), unless the supply is zero-rated. According to subsection 165(3), the tax rate in respect of a zero-rated supply is 0%. A zero-rated supply is a supply that is included in Schedule VI.
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 paragraphs 1(a) through 1(r) applies.
Paragraph 1(l) of Part III of Schedule VI specifically excludes from zero-rating supplies of fruit bars, rolls or drops or similar fruit-based snack foods. Paragraphs 85 and 86 of GST/HST Memoranda Series 4.3, Basic Groceries, (GST/HST Memo 4.3) state that supplies of fruit bars, rolls, or drops or similar fruit-based snack foods (in solid or semi-liquid form) are taxable. Examples include fruit leathers, dried fruit bars, and similar products that are 100% fruit or have fruit as a significant ingredient. Fruit bars may include one or more fruits or 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. Based on the information provided, as fruit is a significant ingredient of the Product, the Product is considered a fruit bar.
The exception for products that are prepackaged for sale in quantities of six or more single servings, as described in paragraph 96 of GST/HST Memo 4.3, is only relevant for the products described in paragraph 1(m) of Part III of Schedule VI.
Paragraph 1(m) excludes from zero-rating cakes, muffins, pies, pastries, tarts, cookies, doughnuts, brownies, croissants with sweetened filling or coating, or similar products from being zero-rated where: (i) they are pre-packaged for sale to consumers in quantities of less than six items each of which is a single serving, or (ii) they are not pre-packaged for sale to consumers and are sold as single servings in quantities of less than six.
As the Product has been determined to be a fruit bar, it is excluded from the category of products listed in paragraph 1(m) of Part III of Schedule V1, and therefore paragraph 1(m) is not applicable. Supplies of the Product are not zero-rated under section 1 of Part III of Schedule VI, regardless of the quantities sold.
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 given in this letter provided that: none of the issues discussed in the ruling 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,
Elizabeth Onsiong
Basic Groceries and Recaptured Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
Email this Content