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: 116309
Attention: XXXXX
XXXXX
Business Number: XXXXX
March 30, 2010
Dear XXXXX:
Subject:
GST/HST RULING
Rice Crackers and XXXXX Rice Crackers XXXXX
Thank you for your XXXXX of XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX Rice Crackers and XXXXX Rice Crackers (the Products).
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 Products are made in XXXXX and are distributed by XXXXX.
2. The Products are available in two flavours. Product 1 is labelled as XXXXX and Product 2 as XXXXX.
3. The ingredients of Product 1 are: XXXXX.
4. Product 1 weighs XXXXXg and is packaged XXXXX. The Nutrition Facts are based upon a serving size of XXXXX.
5. In addition to the Nutrition Facts, the back of the bag of Product 1 contains the following information:
XXXXX.
XXXXX.
XXXXX.
6. The ingredients of Product 2 are: XXXXX.
7. Product 2 weighs XXXXXg and is packaged XXXXX. The Nutrition Facts are based upon XXXXX.
8. In addition to the Nutrition Facts, the back of the bag of Product 2 contains the following information:
XXXXX.
XXXXX.
9. The Products are not shaped like XXXXX.
Ruling Requested
You would like to know how the GST/HST applies to supplies of the Products.
Ruling Given
Based on the facts set out above, we rule that supplies of the Products 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.
The tax rate in respect of a zero-rated supply is 0%. Taxable supplies that are zero-rated for GST/HST purposes are described in Schedule VI.
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.
In particular, paragraph 1(f) of Part III of Schedule VI 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."
GST/HST Memoranda Series 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.
In this case, both of the Products have rice as their main ingredient, which is consistent with the snack foods enumerated in paragraph 1(f). In addition, the Products' flavour XXXXX is that typically associated with these snack foods. Furthermore, the appearance XXXXX, shape XXXXX and the texture XXXXX are similar to those enumerated under paragraph 1(f). The Products are packaged XXXXX.
The Products in this case are therefore considered to be "similar snack foods" for purposes of paragraph 1(f) of Part III of Schedule VI. As such, the Products are excluded from section 1 of Part III of Schedule VI and are therefore, taxable supplies subject to the GST at 5% or HST at 13% as applicable.
It should be noted that no one factor is determinative of the tax status of a product and changes in the labelling, packaging and/or marketing (e.g., a change in the product name or varieties offered) would not necessarily result in a different tax status. All factors must be considered in determining whether a product falls within paragraph 1(f) of Part III of Schedule VI.
The Government of Ontario and the Government of British Columbia have each proposed a harmonized sales tax (HST) which would come into effect on July 1, 2010. The HST rate in Ontario will be 13% of which 5% will represent the federal part and 8% the provincial part. The Government of British Columbia has proposed that the HST rate would be 12% of which 5% would represent the federal part and 7% the provincial part.
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,
Nancy Jardine
Goods Unit
General Operation and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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