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: 108234
Business Number: XXXXX
Attention: XXXXX
XXXXX
February 24, 2009
Subject:
GST/HST RULING
XXXXX
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 XXXXX (the Product).
HST applies at the rate of 13% in the participating provinces of Nova Scotia, New Brunswick and Newfoundland and Labrador. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
Our understanding of the facts is as follows:
1. The Product is sold by XXXXX and is referred to as a XXXXX.
2. Traditional XXXXX is a soft, light-textured bread made from eggs, butter, flour and yeast formed into a XXXXX. Generally XXXXX is either classed as being sweet or savory, depending upon how the recipe is manipulated. The dough of sweet XXXXX may be given some extra sweetness.
3. A sample of the Product was submitted for review. The sample XXXXX were approximately XXXXX in diameter and XXXXX high. The crust was similar to bread and was golden brown in colour, with XXXXX visible through the surface.
4. The sample tasted was light and flakey in texture and had what appeared to be an unsweetened brushed egg coating on the top. The Product had XXXXX as an ingredient and tasted sweeter than plain bread.
5. The samples were packed loosely in a plastic bag and the samples which were previously sent were also packaged loosely in a white box. XXXXX has stated that the Product is sold in bulk from their stores and is labelled as a XXXXX.
6. Although some of the previous samples were shaped differently from the sample tasted, they appeared to have the same light texture. Some contained XXXXX, others XXXXX.
Ruling Requested
You would like to know the GST/HST status of supplies of the Product.
Ruling Given
Based on the facts set out above, we rule that supplies of the Product are taxable at 5% GST or 13% HST pursuant to section 165 where they are prepackaged for sale to consumers individually or in any quantity less than six.
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, every recipient of a taxable supply made in Canada shall pay tax calculated at the rate of 5% on the value of the consideration for the supply (or 13% in the participating provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador) unless the supply is zero-rated. Zero-rated supplies are included in Schedule VI. The tax rate in respect of a zero-rated supply is 0%.
Under Part III of Schedule VI, certain supplies of basic groceries are zero-rated. 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 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(m) of Part III of Schedule VI excludes from zero-rating:
"Cakes, muffins, pies, pastries, tarts, cookies, doughnuts, brownies, croissants with sweetened filling or coating, or similar products where
(i) they are prepackaged for sale to consumers in quantities of less than six items each of which is a single serving, or
(ii) they are not prepackaged for sale to consumers and are sold as single servings in quantities of less than six,
but not including bread products, such as bagels, English muffins, croissants or bread rolls, without sweetened filling or coating;"
For GST/HST purposes, generally a single serving of cake, pie, muffin, pastry, tart, cookie, doughnut, brownie, croissant with a sweetened filling or coating or a similar product, is a serving weighing less than 230g.
It is our position that the Product is considered to be "similar products" for the purpose of paragraph 1(m) of Part III of Schedule VI as the Product is sweet, light in texture and is generally served as a dessert.
As each XXXXX is less than 230g, they would be excluded from zero-rating by paragraph 1(m) of Part III of Schedule VI when sold individually or in a mixed package of similar products containing less than six items.
Paragraph 87 to 100 of the GST/HST Memoranda Series 4.3, Basic Groceries outlines how the GST/HST applies to sweetened goods and similar products. Paragraph 97 states:
"A mixed supply of six or more single servings of these goods is zero-rated. For example, a supply of two bagels, two muffins and two doughnuts, purchased from a doughnut shop (when they are not individually packaged), is considered to be six single servings for the purposes of paragraph 1(m) of Part III of Schedule VI, and therefore zero-rated. If, however, the goods are pre-packaged for sale to consumers individually or in any quantity less than six, the supply is taxable."
For example, where two bread rolls, two muffins, and two of the Products from a grocer's bulk bins are supplied in separate packages, each package is considered to be a separate supply. Thus, the supply of two bread rolls will be zero-rated but the supply of the two muffins, and the supply of two of the Products will be taxable. A sale of the above items from the grocer's bulk bins constitutes a zero-rated supply where they are supplied together in one package.
Therefore, the Product will be zero-rated when sold in single servings in quantities of six or more of the Product or when the Product is sold in combination with six or more single servings of sweetened goods and similar products.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at XXXXX. 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,
XXXXX
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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