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: 153133
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Tax Status of […] Stevia Extracts in Powder and Liquid Form
Thank you for your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of […] Stevia Extracts (the “Products”) in powder and liquid form. 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 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 Products are manufactured and distributed by […] (the Distributor).
2. Distribution is made to a variety of food retailers across Canada.
3. The Products are sold in […] formats: Liquid Extract sold in […] mL and […] mL bottles and available in […][flavour 1] and […][flavour 2]; Powdered Extract sold in […][packaging 1]; and […][packaging 2] or […][packaging 3].
4. As part of its ruling request, the Distributor has provided copies of current labels for the Products and revised labels that will soon appear on all of the packaging.
5. The current and new Stevia Liquid Extract labels state the following:
Current Labelling: […][description of product, use and ingredients]
Proposed Labelling: […][amended description of product, use and ingredients]
6. The current and new labelling for the Stevia Liquid Extract […][flavour 1] is as follows:
Current Labelling [flavour 1]: […][description of product, use and ingredients]
Proposed Labelling [flavour 1]: […][amended description of product, use and ingredients]
7. The current and new labelling for the Stevia Liquid Extract […][flavour 2] is as follows:
Current Labelling [flavour 2]: […][description of product, use and ingredients]
Proposed Labelling [flavour 2]: […][amended description of product, use and ingredients]
8. The current and new labelling for the Stevia Powdered Extract is as follows:
Current Labelling: […][description of product, use and ingredients]
Proposed Labelling: […][amended description of product, use and ingredients]
9. The current and new labelling for the Stevia Extract […] is as follows:
Current Labelling: […][description of product, use and ingredients]
Proposed Labelling: […][amended description of product, use and ingredients]
10. The Distributor’s website […] describes stevia as follows: “[…].”
11. The website lists the following uses for stevia: […]
12. The website also references the following: […][description of use of product]
13. Recipes are posted on the website […]
14. In a telephone conversation on [mm/dd/yyyy], the Distributor confirmed that, in addition to health food stores, the Products are sold in [various] retail outlets such as […].
15. As part of the incoming request, reference was made to a notice issued by Health Canada titled “Notice of Modification to the List of Permitted Sweeteners to Enable the Use of Steviol Glycosides as a Table-Top Sweetener and as a Sweetener in Certain Food Categories (the Notice).” The Notice was issued with an effective date of November 30, 2012. It is the Distributor’s opinion that, as steviol glycosides are now classified as sweeteners, the Products in question should qualify as an ingredient and thus should be afforded zero-rated status.
RULING REQUESTED
In light of Health Canada adding steviol glycosides to the List of Permitted Sweeteners and the Distributor’s transition to the revised labelling for the Products, would supplies of the Products be zero-rated under section 1 of Part III of Schedule VI to the ETA?
RULING GIVEN
Based on the facts set out above, we rule that supplies of the Products with the proposed revised labelling are zero-rated under section 1 of Part III of Schedule VI to the ETA. The Products are ingredients that are not captured by any of the exclusionary paragraphs of (a) to (r) in that section.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
EXPLANATION
Generally, in accordance with section 165, every recipient of a taxable supply made in Canada is required to pay GST/HST on the value of the consideration for the supply. Zero-rated supplies (listed in Schedule VI to the ETA) are subject to the GST/HST at the rate of 0%. Exempt supplies (listed in Schedule V to the ETA) are not subject to the GST/HST.
Section 1 of Part III of Schedule VI to the ETA zero-rates supplies of food or beverages for human consumption, including sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, other than supplies included in paragraphs (a) to (r) of that section.
The terms “food” and “beverage” are not defined in the ETA. As stated in paragraph 2 of the GST/HST Memoranda Series 4.3, Basic Groceries, we consider 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.
The term “ingredient” is also not defined in the ETA. Generally, our view is that an average consumer would consider a product to be an ingredient if the product added to the flavour, texture or appearance of the final product; that is, if it was integral to the final product. Moreover, in order to be regarded as an ingredient to a food or beverage, the final product, in and of itself, must be a food or beverage.
With respect to the Products, the proposed revised labelling clearly identifies the Products as sweeteners and has removed any risk information previously referenced. Furthermore, the Products are advertised as sweeteners and are marketed as alternatives to sugar and artificial sweeteners. The Products are used, recognized, and commonly sold as an ingredient. The primary use of the Products is to impart a sweet taste to food and drink to which it is added. Thus, we consider each of the Products with the proposed revised labelling to be an ingredient.
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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