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: 171051
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Application of GST/HST to […] Coconut Chips
Thank you for your fax of June 17, 2015 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to […] Coconut Chips (the Product) manufactured by […] (the manufacturer) and imported by […] (the distributor). We apologize for the delay in responding.
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 (ETA) unless otherwise specified.
STATEMENT OF FACTS
1. The distributor is registered for GST/HST purposes.
2. The Product is packaged in a […] gram […][packaging] that contains bite-sized slices of […] coconut.
3. The Product is described on the back of the [packaging] as follows: […]
4. The Product’s packaging also includes […].
5. Ingredients for the Product are […].
6. The nutritional data on the packaging shows the sugar content as […]g and the salt content as […]mg per […]g serving of the Product.
7. The distributor has provided […] sample [packaging] of the Product for our review.
8. A physical examination of the Product revealed that the Product is comprised of […] pieces of coconut. The pieces can be anywhere between […] cm to […] cm in length.
9. In terms of taste, the Product does not have a salty/savoury taste. Rather, the Product has a sweet taste.
10. In making the Product, the coconut meat is not baked or fried, […].
RULING REQUESTED
You would like to know whether the supply of the Product is 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 a taxable supply that is excluded from zero-rating under section 1 of Part III of Schedule VI pursuant to paragraph 1(e) of Part III of Schedule VI.
EXPLANATION
Generally, in accordance with section 165, 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(e) of Part III of Schedule VI excludes from zero-rating supplies of candies, confectionery that may be classed as candy, or any goods sold as candies, such as candy floss, chewing gum and chocolate, whether naturally or artificially sweetened, and including fruits, seeds, nuts and popcorn when they are coated or treated with candy, chocolate, honey, molasses, sugar, syrup or artificial sweeteners.
For GST/HST purposes, coconut is considered a nut. Our research indicates that the sugar content of raw coconut meat is approximately 6g per 100g of weight. As the sugar content of the Product is […]g per […]g, we consider the coconut chips to be nuts treated with sugar. Therefore, the Product is excluded from zero-rating under paragraph 1(e).
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 905-721-5220. 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,
Zubair Patel
Basic Groceries and Point-of-Sale Rebates Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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