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: 174270
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
[…][the Product – Dietary Supplement]
Thank you for your fax of December 1, 2015, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to […](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
From the information provided in the request for the ruling, our telephone conversation of January 29, 2016, and in review of the product website, it is our understanding that:
1. […](the Company) is a GST/HST registrant under Business Number […].
2. The Company supplies […][the Product] in a powdered format.
3. The Product is a strain of […][the Product source] called […][XYZ].
4. The Company obtains supplies of the Product from […][Company A], a company located in […][City 1, Country A].
5. The Company supplies the Product under the brand name […].
6. The Product is available directly from the Company through internet and telephone ordering and it is also available from health food stores and over [#] pharmacies.
7. The Product is supplied in bottles that contain […]grams of the Product or in bags that contain […]grams of the Product.
8. The Product packaging provides a nutritional fact chart as follows (per 500mg): […]
9. The Product packaging provides a contents representation as follows: […]
10. The Product website specifically lists [#] fatty acid profiles and lists [#] amino acid profiles ([#] being referenced as essential).
11. The Company has represented the supply of the Product as a supply of a natural food product or a whole food that people eat.
12. The Company operates a […] support line that is accessible to customers by means of a telephone line or an email drop box.
13. The Company’s website represents that […]grams of the Product is a […][# day] supply of the Product and that […]grams of the Product is a [#] day supply.
14. Supplies of the Product come with a […][measuring device].
15. The Company website states to use the [measuring device] provided to measure your daily serving of the Product.
16. To ingest the Product the consumer is directed to add […]mg of the Product to […] ounces of water or juice, or to add it to applesauce or yogurt. […].
17. The Product has been reviewed by Health Canada and has recently been determined to be a therapeutic.
18. […] customers may mask the taste of the Product by mixing it […].
19. […][Representations have been made] about how ingestion of the Product has relieved health problems […][such as] headaches, acid reflux, gastro-intestinal, crohns & colitis, and skin conditions.
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 supply of the Product is a taxable supply that does not qualify for zero-rating under section 1 of Part III of Schedule VI. The Product is therefore subject to GST/HST at the rates of 5%, 13% or 15%, depending on the province in which the supply is made.
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 at the rate of 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island) unless the supply is zero-rated. 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.
The terms "food" and "beverage" are not defined in the Act. However, the CRA considers 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. Consumers usually consume food and beverages to sustain or maintain life, to allay hunger or thirst, or for enjoyment rather than for therapeutic or preventative effects (e.g., to correct actual or perceived health problems) or to achieve specific beneficial benefits related to performance or physique.
Products commonly referred to as dietary supplements are consumed for their therapeutic or preventative effects (e.g., to correct actual or perceived health problems), or to achieve specific beneficial effects related to performance or physique. This also includes products that are labelled or marketed as products to be consumed primarily to facilitate the intake of ingredients that place an emphasis on such claims. Products commonly referred to as dietary supplements are not considered to be basic groceries and are not within the scope of section 1 of Part III of Schedule VI. As such, these products are taxable.
The Product is recognized by Health Canada under the Natural Health Products Regulations as a natural health product holding Natural Product Number (NPN) […] and has been described as a therapeutic. As well, Health Canada describes [XYZ] as a medicinal ingredient. […] the Product website emphasizes the benefits to be obtained by ingesting the predetermined amount of the Product on a daily basis and identifies a variety of ailments that the Product affects. Further, the Product is supplied in a powdered format. Based on the information reviewed, the Product is not an ingredient used to produce a beverage rather, the Product is taken with water to allow for the ingestion of the Product and the Product is consumed in accordance with a recommended dosage. The Product is not a food, beverage, or an ingredient. The Product is a dietary supplement and, as such, is not zero-rated as a basic grocery.
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, CPA-CGA
Basic Groceries and Recaptured Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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