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.
XXXXX
XXXXX
XXXXX
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 119906
Attention: XXXXX XXXXX XXXXX
April 22, 2010
Dear XXXXX:
Subject:
GST/HST RULING
Application of GST/HST to XXXXX Crackers
Thank you for your letter of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX Crackers.
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
We understand the relevant facts as follows.
1. The product is XXXXX Crackers (the Product).
2. XXXXX.
3. You provided a sample of the Product in plain packaging. XXXXX packaging XXXXX were also provided.
4. The Product is a XXXXX.
5. The label on the XXXXX packaging XXXXX refers to the Product as XXXXX.
6. The Product will come in XXXXX varieties. XXXXX.
7. The Product's ingredients include XXXXX.
8. The Product will be sold in XXXXX. The manufacturer suggests shelving the Product with other XXXXX crackers, but has no control on the placement of the product by the retailers.
Ruling Requested
You would like to know the GST/HST 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. The tax rate in respect of a zero-rated supply is 0%, where a zero-rated supply is a supply that is included 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.
Paragraph 1(f) excludes supplies of 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) from zero-rating.
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.
The properties of the Product indicate that it fits within paragraph 1(f) of Part III of Schedule. These include the Product's flavours, its texture (XXXXX), its appearance, the XXXXX labelling which includes the word XXXXX under its name, and the fact that it is XXXXX packaged XXXXX.
Although we consider product placement as a relevant consideration, it alone is not considered a determinative factor. Also, placement is at the discretion of retailers, and XXXXX.
The Product is considered to be "other similar snack foods" under paragraph 1(f). As a result, the Product falls under the exclusion pursuant to paragraph 1(f) of Part III of Schedule VI, and its suppliers are taxable at 5%GST, 13% HST.
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. The Government of Nova Scotia has proposed, that effective July 1, 2010, the HST rate for Nova Scotia would increase from 13% to 15%.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-8815. 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,
Raymond Labelle
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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