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: 172223
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Application of GST/HST to […] Baked Snack Crackers
Thank you for your letter of August 11, 2015, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to […] Baked Snack Crackers (the Product). We apologize for the delay in responding.
The HST applies in the participating provinces at the following rates: 13% in Ontario; 14% in Prince Edward Island; and 15% in New Brunswick, Newfoundland and Labrador and Nova Scotia. The Government of Prince Edward Island has proposed to increase the rate of the HST in that province from 14% to 15% effective October 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 Company) is registered for GST/HST purposes.
2. The Company sells the Product, which is available in three flavours: […].
3. The Product is marketed as baked snack crackers and sold in the cracker section of the supermarket.
4. Copies of the Product labels have been provided for each of the flavours.
5. The Product contains bite-sized, […] pieces that are loosely packaged in a […]gram box. Each piece is approximately […]inch long and […]inch wide.
6. The Product label indicates the Product as being […].
7. The ingredients for each of the three flavours are as follows: […]
RULING REQUESTED
You would like to know the GST/HST status of the Product.
RULING GIVEN
Based on the facts set out above, we rule that the Product is zero-rated under section 1 of Part III of Schedule VI to the ETA.
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 13% in Ontario; 14% in Prince Edward Island; and 15% in New Brunswick, Newfoundland and Labrador and Nova Scotia), unless the supply is zero-rated. The Government of Prince Edward Island has proposed to increase the rate of the HST in that province from 14% to 15% effective October 1, 2016. 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(f) of Part III of Schedule VI excludes from zero-rating the following:
“chips, crisps, puffs, curls or sticks (such as potato chips, corn chips, cheese puffs, potato sticks, bacon crisps and cheese curls), other similar snack foods or popcorn and brittle pretzels, but not including any product that is sold primarily as a breakfast cereal”.
Paragraph 56 of GST/HST Memorandum 4.3, Basic Groceries, (GST/HST Memo 4.3) outlines the factors that are used to determine if a particular product is similar to a chip, crisp, puff, curl or stick as described under paragraph 1(f) of Part III of Schedule VI. These factors include the properties of the product (ingredients, flavours, texture, cooking process and appearance), its labelling, its packaging, and its marketing.
Though the Product is packaged loosely in a box and is available in a savoury flavour that is commonly found in snack foods listed in paragraph 1(f), the Product’s main ingredients, shapes, labelling and marketing differ significantly from those types of snack foods. As such, we do not consider the Product to be snack food that is excluded from zero-rating under paragraph 1(f) of Part III of Schedule VI.
Paragraph 94 of GST/HST Memo 4.3 states in part:
"The following are examples of zero-rated supplies…:
…
• crackers (other than graham crackers), including:
…
- snacking crackers (including vegetable, bacon or cheese flavoured)…"
The Product is found to be similar to snacking crackers which are not excluded by any of paragraphs (a) to (r) of section 1 of Part III of Schedule VI to the ETA. Thus, supplies of the Product are zero-rated under section 1 of Part III of Schedule VI.
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 905-721-5218. 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, CPA, CGA
Basic Groceries and Recapture Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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