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: 173200
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Application of GST/HST to […][XYZ] Seeds
Thank you for your fax of October 2, 2015, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of […][XYZ] Seeds (the Product) that is sold by […] (the Company). 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
We understand the following:
1. The Company is registered for GST/HST purposes.
2. The Product is packaged in a […]gram bag.
3. The ingredients of the Product are: […].
4. […]. The labelling describes the Product as fragrant, sweet, […] seeds packed in a soft bag and that it is not just a snack.
5. The labelling on the front of the bag states that the Product is soaked in sugar.
6. The Product is not baked or fried.
7. The nutritional facts on the back of the bag indicate there are […]grams of sugar per […]gram serving of the Product. There is no sodium.
8. The labelling on the back of the bag indicates that the Product can be eaten warm by heating it in the microwave.
9. On the manufacturer’s website, the Product is described as a nutritious and healthy snack.
10. Our research shows that […] seeds are the edible seeds of the […], and that in their natural state, contain no sugar.
RULING REQUESTED
You would like to know the GST/HST tax status of the Product.
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 paragraph 1(e) of Part III of Schedule VI.
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 at the rate of 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. The tax rate in respect of a zero-rated supply is 0%.
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.
Paragraph 1(e) excludes from zero-rating supplies of candies, confectionary that may be classed as candy, or any goods sold as candy, 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.
Paragraph 47 of GST/HST Memoranda Series 4.3, Basic Groceries, provides that, if a product is labelled and marketed solely for use as a baking ingredient, it will be zero-rated. However, if a product is marketed as an ingredient and for another use (e.g., as a snack food), that product may be excluded from zero-rating by one of the exceptions listed in paragraphs (a) to (r) of section 1 of Part III of Schedule VI.
The Product is marketed as a snack food and contains seeds which have added sugar. Supplies of the Product are taxable supplies that are excluded from zero-rating under paragraph (e), as the Product is considered to be seeds “coated or treated with sugar”.
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 905-721-5222. 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,
David Nichol
Basic Groceries & Recaptured Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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