Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings
Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
Case Number: 101883
Attention: XXXXX
XXXXX
October 15, 2008
Subject:
GST/HST RULING
XXXXX - Whether an Ingredient or a Dietary Supplement
Dear XXXXX:
Thank you for your letter of XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the XXXXXGST/HST Rulings Centre. XXXXX to the Goods Unit of the Excise and GST/HST Rulings Directorate.
All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.
Statement of Facts
Based on the information contained in your letter, and on information obtained through our own research, we understand the facts to be as follows:
The Product
1. XXXXX distributes a product called XXXXX.
2. XXXXX consists XXXXX sold in the form XXXXX.
3. XXXXX.
4. XXXXX.
5. XXXXX.
6. XXXXX.
Packaging and Labelling
7. XXXXX.
8. The background colour of the container and of the label is XXXXX. The relevant parts of the label on XXXXX can be divided into the four following categories:
a) Brand identification and the front display of XXXXX
This is the most visible part - designed as the front display, "XXXXX is printed at XXXXX, XXXXX is printed XXXXX, but the characters XXXXX, and finally XXXXX and XXXXX printed XXXXX in XXXXX.
b) Ingredient identification, directions for use XXXXX.
The English version is as follows: XXXXX.
The French version reflects the English version XXXXX.
c)XXXXX
There is a logo XXXXX which represents XXXXX. XXXXX.
d) Nutrition facts
The label indicates that there are XXXXX calories per XXXXX. The label also indicates that XXXXX contains the XXXXX as follows:
XXXXX.
Marketing
9. XXXXX is offered generally at the retail price of XXXXX. Thus, the recommended serving of XXXXX. XXXXX and is XXXXX XXXXX. Other XXXXX cost XXXXX to provide XXXXX XXXXX.
10. Based on our XXXXX research, we found that XXXXX commonly offered to the public: XXXXX. With the exception of the XXXXX, our XXXXX research indicates that XXXXX are presented as XXXXX. All XXXXX products are more often presented in pill or tablet form.
11. The XXXXX customers to find retailers where XXXXX is available XXXXX. We reviewed XXXXX and examined a large sample of retailers where XXXXX is available; the vast majority of these retailers are XXXXX.
In our sample, we did not find any other kind of retailer selling XXXXX.
12. XXXXX
Ruling Requested
You would like to know whether XXXXX, as described above, would be considered as a food or an ingredient or a dietary supplement for GST/HST purposes.
You also asked in another letter dated XXXXX, whether XXXXX would be zero-rated as a nutritional supplement for GST/HST purposes. We will make that determination in our response to that letter.
Ruling Given
Based on the facts set out above, we rule that XXXXX is not a food or ingredient for GST/HST purposes. Unless XXXXX is determined to be a nutritional supplement, it would be subject to GST at 5% or HST at 13%.
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
Taxable supplies of goods and services made in Canada are generally subject to tax at 5% (13% where the supplies are made in one of the participating provinces of Nova Scotia, New Brunswick or Newfoundland and Labrador). Nevertheless, zero-rated supplies of goods and services are subject to tax at the rate of 0%. A zero-rated supply is any supply included in Schedule VI.
Section 1 of Part III of Schedule VI, entitled "Basic Groceries", 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 one of the exclusions set out in paragraphs 1(a) through (r) applies. None of the exclusions from zero-rating apply specifically to XXXXX.
The words "food", "beverages" and "ingredients" are not defined in the legislation. Memoranda Series Chapter 4.3 Basic Groceries addresses the question of whether products commonly described as "dietary supplements" are zero-rated as food, beverages or ingredients. Paragraph 2 of Memorandum 4.3 states that the CRA considers a product to be a food or beverage if an average consumer would recognize and purchase XXXXX 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 effects related to performance or physique.
With respect to ingredients, paragraph 4 of Memorandum 4.3 states that an average consumer would consider a product to be an ingredient if it added to the flavour, texture or appearance of the final product; that is, if it was integral to the final product. Moreover, to be considered an ingredient, the final product must, in and of itself, be a food or beverage. A product that is marketed for its beneficial effects and that is added to a food or beverage simply as a way to consume it would not be considered an ingredient.
However, not all things that are added to food are considered to be zero-rated ingredients. Memorandum 4.3 lays out more specific criteria for determining whether a product is a dietary supplement in paragraphs 148 to 159, based on the following sources:
• labelling;
• packaging/format; and
• marketing.
Some of the criteria in Memorandum 4.3 are not applicable to XXXXX or are not indicative of XXXXX as being a dietary supplement. However, a number of criteria are present which do indicate that XXXXX is a dietary supplement rather than a food or ingredient for purposes of the GST/HST.
These criteria are:
• XXXXX is sold in a marketing context in which it is in competition with other XXXXX products XXXXX.
• XXXXX suggests that XXXXX - with which XXXXX is in competition on the market.
• Packaging is in a form similar to a dietary supplement (format, colour and size of container).
• The price of XXXXX at the retail level is XXXXX. XXXXX, is necessary to have XXXXX effect. The price of XXXXX
• The vast majority of retailers for XXXXX are XXXXX
• The XXXXX above the name of XXXXX on the package suggests XXXXX. (XXXXX the directions indicate that XXXXX, the XXXXX inscription at XXXXX.
• The XXXXX suggest XXXXX.
• The XXXXX nominally for XXXXX makes claims that XXXXX can help XXXXX and, in some cases, XXXXX. Most of the XXXXX consists of supporting these claims with representations XXXXX.
This XXXXX the claims and representations are inherent to the product itself, XXXXX. In view of examining the marketing, labelling and packaging criteria as a whole, the fact that there is also a XXXXX does not preclude XXXXX from being considered as a dietary supplement.
The marketing, packaging and labelling elements considered together provide an overall indication that XXXXX is a dietary supplement rather than XXXXX.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-8815.
Yours truly,
Raymond Labelle
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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