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, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 181174
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Application of GST/HST to packages of fresh produce
Thank you for your letter of December 8, 2016, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of freshly packaged produce.
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
In review of your submission and the supplemental pictures provided, we understand the following:
1. […] (the Company) is a GST/HST registrant under Business Number […].
2. The Company is a […] grocery retailer […].
3. The Company carries five varieties of fresh cut produce (the Products), packaged for sale […].
4. The five varieties of fresh cut packaged produce are as follows:
1) Fresh cut carrots :
The carrots are cut and cleaned and packaged into a […] oz. plastic container […] to allow for the insertion of a small plastic container of vegetable dip.
2) Fresh cut carrots with fresh cut celery:
The carrots and celery are cut and cleaned and packaged into a […] oz. plastic container […] to allow for the insertion of a small plastic container of vegetable dip.
3) Large fresh cut carrots with fresh cut celery:
The carrots and celery are cut and cleaned and packaged into a […] oz. plastic container […]. The container measures […]. The container does not hold any dip. The carrots are placed on one side of the container with the celery placed on the other side of the container. The vegetables are tightly packed on top of each other and there is no separation between the carrots and celery.
4) A mix of three or more cut and cleaned vegetables (carrot, celery, broccoli, tomatoes, and cauliflower) packaged in a […] oz. plastic container […]. The container measures […] and contains a small container of vegetable dip in addition to the cut vegetables. The vegetables are placed in their own clusters without any separation between them.
5) A mix of four or more cut and cleaned vegetables (e.g. cauliflower, broccoli, radish, cucumber, carrot) packaged in a […] oz. plastic container […]. The container measures […]. The container may, or may not, contain a smaller container of vegetable dip. The vegetables are placed in the container in clusters without any separation between the vegetables.
5. The vegetables are generally cut and cleaned in lengths or chunks that would be larger than that used in salads. The exception to this would be when slices of radish or cucumber are included in the vegetable mix. These slices are the diameter of vegetables commonly used in salads.
6. The Products, with or without dip, were designed as quick, healthy lunches and snacks.
7. The Company produces other mixed vegetable products where the containers are made of a more rigid plastic and the containers are formed with separate compartments for each vegetable. The Company treats these supplies as being other arrangements of prepared foods and excludes them from zero-rating.
8. The containers of the fresh cut produce are put together in approximately […][less than one minute]. The produce is not arranged for visual effect. Rather, the produce is placed in a clear plastic container so that the prospective consumer can see the variety and quality of produce prior to selecting the container they desire. Where a dip is contained in the Products, it has no specific location to be placed and can be found underneath the contained vegetables, to the side of them, or on top of them. There is no consistency in the location of the dips held in the product containers. The container is designed functionally to allow for the holding and conveyance of produce (and in some cases produce and dip).
9. The quantity of produce held in the containers is intended to serve as a healthy lunch or snack for one individual.
10. The Company’s other mixed vegetable containers are arranged for visual effect with a specific area in which the vegetable dip is placed. These products require […][several] minutes to prepare. The intention with these products is that the produce will be made available, or served, from these containers.
RULING REQUESTED
You would like to know if the Products are zero-rated basic groceries.
RULING GIVEN
Based on the facts set out above, we rule that the Products are zero-rated basic groceries under section 1 of Part III of Schedule VI.
EXPLANATION
Generally, in accordance with section 165 of the ETA, every recipient of a taxable supply made in Canada is required to pay GST/HST on the value of the consideration for the supply, unless the supply is zero-rated (listed in Schedule VI to the ETA and subject to the GST/HST at the rate of 0%) or exempt (listed in Schedule V to the ETA and not subject to the GST/HST).
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 (o.1) excludes salads not canned or vacuum sealed from zero-rating and paragraph (o.3) excludes platters of cheese, cold cuts, fruit or vegetables and other arrangements of prepared food from zero-rating. Based on our understanding of facts, it is our opinion that the Products at hand would require additional preparation in order to become a salad and the Products are not prepared in a manner to give a visual effect. Further, the container is a device for the purpose of holding and conveying the fresh produce and is not an apparatus from which the elements are to be served (in a manner similar to catering). The Products are not excluded from zero-rating by any of the paragraphs (a) through (r).
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(s) given in this letter provided that: none of the issues discussed in the ruling(s) 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 905-721-5123. 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 and Recaptured Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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