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: 204827
Business Number: […]
Attention: […]
September 22, 2020
Dear [Client]:
Subject: GST/HST RULING
Seaweed Products
Thank you for your letter of November 11, 2019, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the supplies of […](Product 1) and […](Product 2), that are sold by […](the Company). We apologize for the delay in replying.
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
We understand the facts as follows:
Product 1
1. Product 1 is imported […].
2. Product 1 contains […][seaweed and other ingredients].
3. Product 1 is marketed with the following description on the Company’s website: […][description references salty flavor of Product 1].
4. On the manufacturer’s website, […], Product 1 is also shown to be available in other flavours: […].
5. Product 1 consists of rectangular seaweed strips, loosely packaged in a foil bag, supplied in a single serving.
6. Each strip consists of […] thin, light, dry seaweed sheets with […][ingredients], that make it crispy and crunchy.
7. The size of each strip is […].
8. Each package of Product 1 weighs [#] grams and is sold individually for $[…].
Product 2
1. Product 2 is imported […].
2. Product 2 contains the […][seaweed and other ingredients] .
3. Product 2 is produced using a roasting process.
4. The packaging of Product 2 contains the following serving suggestions:
[…]
5. The packaging of Product 2 also includes the following references:
[…].
6. On the manufacturer’s website, […], the following information was obtained:
i. Product 2 [description][…].
ii. Shelf life is stated to be 12 months.
iii. Product 2 is available in other flavours: […].
iv. Product 2 in other flavours is described as […]; and [the website] includes [recipe] suggestions […].
7. There are [#] single serving foil packets in the package, each weighing [#] grams.
8. Each packet contains [#] rectangular sheets of Product 2, layered in a […], and wrapped in a foil-type package. The size of each sheet is […].
9. Product 2 has a thin, light, dry and flaky texture.
RULING REQUESTED
You would like to know if the supplies of Product 1 and Product 2 (the Products) are zero-rated as basic groceries.
RULING GIVEN
Based on the facts set out above, we rule that the supplies of the Products are excluded from zero-rating under 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 included in paragraphs (a) to (r) of that section.
Paragraph 1(f) of Part III of Schedule VI to the ETA excludes from zero-rating the following:
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.
Paragraph 57 of the GST/HST Memoranda Series 4.3, Basic Groceries (MS 4.3) states
"Please note that products that are enumerated in paragraph 1(f) generally have potatoes, corn, or corn meal as a main ingredient. However, inclusion of ingredients not listed above would not preclude a particular product from falling within paragraph 1(f)”.
Our position is that if a product is represented (i.e., labelled and marketed) solely for use as an ingredient, it may be zero-rated. However, if a product is represented as a snack food that can be used as an ingredient/garnish, that product will be excluded from zero-rating if it falls within any one of the exceptions listed in paragraphs 1(a) to (r) of Part III of Schedule VI to the ETA.
This would mean that if the Product is represented as a snack which is excluded from zero-rating under paragraph 1(f) of Part III of Schedule VI to the ETA, the Product would not be zero-rated even though it can be used as an ingredient.
The following factors as listed in paragraph 56 of MS 4.3 are used when determining whether a food product is similar to the “snack foods” as identified in paragraph 1(f) of Part III of Schedule VI to the ETA:
Properties
* Ingredients: potatoes, corn or corn meal.
* Flavours: In addition to salty, the product is available in flavours such as salt and vinegar, barbecue, all-dressed, cheese, nacho, ketchup, pizza, sour cream and onion, etc.
* Texture: crispy, crunchy, brittle or fluffy.
* Cooking process: deep fried or baked.
* Size and shape: small, thin, slice, (chip); long and slender cylindrical form (stick); fluffy mass (puff); or spiral or winding form (curl).
Labelling
* The word "chip", "crisp", "puff", "curl" or "stick" appears in the name of the product or elsewhere on the label (e.g., "healthier than a chip", "tastes like a chip" or "part chip").
* The label includes words found on packages of chips, crisps, puffs, curls, or sticks (e.g., "snack", "party snack" or "crunch").
Packaging
* The product is packaged loosely in a bag.
Marketing
* The advertising, whether through print or electronic media, includes words such as "chips", "crisps", "puffs", "curls" or "sticks" (e.g., "chip-loving eaters" or "healthier than a chip").
* The advertising, whether through print or electronic media, includes words found on packages of chips, crisps, puffs, curls or sticks (e.g., "snack", "snack food", "party snack", "crunch" or "crispy").
PRODUCT 1
Properties
Ingredients: The main ingredients of Product 1 are: [seaweed and] […].
Flavours: Product 1 is sweet and salty. It is available in different flavours: […].
Texture: Product 1 is thin, light, dry, crispy and flaky.
Cooking process: Product 1 is roasted. It is not deep-fried or baked.
Size and shape: Product 1 is rectangular in shape. It comes in a convenient-size package and can be eaten directly, without further processing, by just opening the bag.
Labelling
The labelling of Product 1 states it is a seaweed snack and the words, “seaweed crisps” are included on the front label.
Packaging
Product 1 is packed loosely in foil-type bags similar to a bag of chips, in a single serving size.
Marketing
Product 1 is marketed as seaweed crisps and can be found in the snack aisle of most retail stores.
PRODUCT 2
Properties
Ingredients: The main ingredients of Product 2 are […][seaweed and] […]
Flavours: Product 2 is salty. It is available in other formats and flavours:[…].
Texture: Product 2 is thin, light, dry, crispy and flaky.
Cooking process: Product 2 is not deep-fried or baked but roasted with […].
Size and shape: Product 2 is rectangular in shape. It comes in a convenient-size package and can be eaten directly, without further processing, by just opening the bag.
Labelling
Product 2 is labelled as Roasted Seaweed with serving suggestions such as: […]
Packaging
Product 2 is packed in single serving foil-type bags similar to a bag of chips.
Marketing
Product 2 is marketed as Roasted Seaweed and can be found in the snack aisle of most retail stores. Product 2 in other flavours is described on the manufacturer’s website, as […]. It also includes […][snack and recipe suggestions].
Although Product 1 and Product 2 do not have potatoes, corn or corn meal as the main ingredients and can be used in food preparation, the properties, labelling, packaging, and marketing elements considered together provide an overall indication that the products are snack food similar to those listed in paragraph 1(f) of Part III of Schedule VI to the ETA. As such, they are excluded from zero-rating as the Products:
• have a salty and savoury taste;
• are crispy or crunchy in texture;
• are packaged in a fashion similar to other snack foods;
• are enjoyed and regarded as a snack food;
• can be consumed directly by just opening the bag;
• are generally marketed as a healthy snack food;
• are likely to be found in the snack aisle of retail stores;
• are not promoted solely for use as ingredients in food preparation; and
• are generally marketed as a snack food to compete with chips.
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. The interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA's interpretative policy could affect the interpretation(s) or the additional information provided herein.
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,
Elizabeth Onsiong
Basic Groceries and Recaptured Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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