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
Attention: XXXXX
XXXXX
Case Number: 115771
Business Number: XXXXX
July 20, 2009
Dear XXXXX:
Subject:
GST/HST RULING
XXXXX
Thank you for your letters of XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to 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 manufactured by XXXXX.
2. The Product is available in two varieties: XXXXX.
3. The Product consists of a box which contains XXXXX bars which are referred to as "XXXXX". Each bar weighs XXXXXg and the box of bars weighs XXXXXg. Each bar has XXXXX calories.
4. The submission included a sample box of each of the bars and a sell sheet.
5. The labelling on the front of the XXXXX box describes the Product as: XXXXX.
6. The side panel of the XXXXX Product lists the nutrition facts and ingredients. The XXXXX Product ingredients are: XXXXX.
7. The Nutrition Facts per bar (XXXXXg) XXXXX Product is as follows:
Amount
% Daily Value
Calories
XXXXX
Fat XXXXXg
XXXXX%
Saturated XXXXXg
+Trans XXXXXg
XXXXX%
Cholesterol XXXXXmg
Sodium XXXXXmg
XXXXX%
Carbohydrate XXXXXg
XXXXX%
Fibre XXXXXg
XXXXX%
Sugars XXXXXg
Protein XXXXXg
Vitamin A
XXXXX%
Vitamin C
XXXXX%
Calcium
XXXXX%
Iron
XXXXX%
8. The labelling on the front of the XXXXX box describes the Product as: XXXXX.
9. The side panel of the XXXXX Product lists the nutrition facts and ingredients. The XXXXX Product ingredients are: XXXXX.
10. The Nutrition Facts per bar (XXXXXg) XXXXX Product is as follows:
Amount
% Daily Value
Calories
XXXXX
Fat XXXXXg
XXXXX%
Saturated XXXXXg
+Trans XXXXXg
XXXXX%
Cholesterol XXXXXmg
Sodium XXXXXmg
XXXXX%
Carbohydrate XXXXXg
XXXXX%
Fibre XXXXXg
XXXXX%
Sugars XXXXXg
Protein XXXXXg
Vitamin A
XXXXX%
Vitamin C
XXXXX%
Calcium
XXXXX%
Iron
XXXXX%
11. The submission included a sell sheet for the Product, which will be distributed to XXXXX customers. XXXXX marketing strategy for the Product on this sheet focuses on XXXXX. The sell sheet highlights the following virtues of the Product: XXXXX
12. The Product is not sold primarily as a breakfast cereal.
Ruling Requested
You would like to know the GST/HST status of supplies of the Product. You specifically request that paragraphs 1(h) and (m) of Part III of Schedule VI, as well as meal replacement products and nutritional supplements be considered when determining the tax status 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.
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 (13% in the participating provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador) unless the supply is zero-rated, pursuant to subsection 165(3). The tax rate in respect of a zero-rated supply that is included in Schedule VI to the ETA 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.
Products that qualify and are labeled as "nutritional supplements" or "meal replacements" pursuant to the Food and Drugs Act and Regulations are considered food or beverages for purposes of section 1 of Part III of Schedule VI. Moreover, they are not subject to the exclusions under paragraphs 1(a) to 1(r) of Part III and, therefore, are zero-rated. In addition, if a product is represented as being a meal replacement or nutritional supplement as evidenced by the label, the Canada Revenue Agency (CRA) will accept this information as fact in determining its tax status.
Based on the Product's nutrition facts, the Product does not meet the requirements outlined in the Food and Drug Regulations to be considered either a meal replacement or a nutritional supplement. In addition, the Product's label does not advertise it as either a meal replacement or a nutritional supplement.
Under paragraph 1(h) of Part III of Schedule VI, the following products are excluded from zero-rating:
"granola products, but not including any product that is sold primarily as a breakfast cereal."
Granola products may be sold loose or pressed into bars. Granola bars generally have a mixture of cereals (e.g., rolled oats, rice or other whole grains) and honey and/or syrup as the main ingredients, and may include nuts and fruit. The ingredients in granola bars are not processed to a great extent, and the distinct character of each ingredient is retained. Granola bars may have a chocolate or sweetened coating.
Cereal bars, on the other hand, usually have ingredients similar to granola bars, but the ingredients in cereal bars are processed to a greater extent resulting in a muffin-like texture. Cereal bars are treated as a product similar to sweetened baked goods for GST/HST purposes. Paragraph 1(m) of Part III of Schedule VI excludes from zero-rating such products when sold in quantities of less than six items each of which is a single serving. Please refer to the topic "Bars" on page 9 of the January 2007 version of GST/HST Memoranda Series 4.3, Basic Groceries, available on our Web site, for further information regarding the application of GST/HST to various products labelled and packaged as bars.
Based upon the Product's composition, it is considered to be a granola product and not a cereal bar. As the Product is considered to be a granola product that is not sold primarily as a breakfast cereal, it falls under the exclusion pursuant to paragraph 1(h) of Part III of Schedule VI, and is taxable at 5% GST or 13% HST, as applicable.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (902) 426-6940. 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,
Nancy Jardine
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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