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: 158191
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Application of GST/HST to Energy Snacks
Thank you for your fax of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to varieties of Energy Snacks (the Products) manufactured by […][(the manufacturer)]. 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 manufacturer is registered for GST/HST purposes.
2. The Products consist of bags of energy […][snacks] and energy snack pack boxes.
3. An energy [snack] bag can be described as a package of bite-sized pieces. The [snacks] are currently sold in [#] flavours: […][names of various flavours offered].
4. An energy snack pack box consists of [#] smaller packets of energy [snacks]. Each packet totals […] grams in weight. Energy snack pack boxes are only available in […][some] flavours.
5. When sold in individual bags, the energy [snacks] are packaged loosely in a […] gram bag that is sealable […].
6. The front of the bag for each of the energy [snacks] products notes the flavour of the product and describes the product as “[…]”.
7. In a telephone conversation on [mm/dd/yyyy], the representative confirmed that the Products are made by way of dehydration. The Products are not baked or deep-fried.
8. The back of the bag for each of the energy [snacks] products notes the ingredients of the product. […][Ingredients for the various flavoured energy snacks].
9. The available flavours are described on your website as follows: […][description of the various flavoured energy snacks]
10. The representative provided a sample bag of the […] Energy [snacks] for our review.
11. A physical examination of the product revealed that the pieces are hard and brittle. The pieces can be anywhere between […] in size. […].
12. A list of retailers posted on the manufacturer’s website reveals that the Products are sold mainly in health food and specialty stores.
RULING REQUESTED
You would like to know whether the supply of the Product is zero-rated or taxable at the full rate of GST/HST.
RULING GIVEN
Based on the facts set out above, we rule that the supply of the Product is a zero-rated supply pursuant to section 1 of Part III of Schedule VI to the ETA.
EXPLANATION
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 excluded from zero-rating by way of paragraphs (a) to (r) of that section.
Paragraph 1(f) of Part III of Schedule VI excludes from zero-rating supplies of 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).
GST/HST Memorandum 4.3, Basic Groceries outlines 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.
While the Product may have some of the properties and factors similar to those listed in GST/HST Memorandum 4.3 for products that fall under paragraph 1(f), the physical properties and cooking process are different from those generally used for "other similar snack food". Specifically, the Product does not have the ingredients and flavouring usually associated with products falling under paragraph 1(f), nor can the Product be described as a product that is salty and savoury. Furthermore, while products falling under paragraph 1(f) are normally deep-fried or baked, the Product is made by way of dehydration.
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 905-721-5220. 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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