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
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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 123488
Business Number: XXXXX
Attention: XXXXX
October 26, 2010
Dear XXXXX
Subject:
GST/HST RULING
Custom grazing
Thank you for your XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to custom grazing.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick and Newfoundland and Labrador, and 12% in British Columbia. 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. XXXXX provides custom grazing services and is registered for GST purposes with Business Number XXXXX
2. XXXXX.
3. XXXXX.
4. XXXXX.
5. XXXXX.
6. XXXXX.
7. XXXXX.
8. XXXXX.
9. XXXXX.
10. XXXXX invoices were supplied for our review. The invoices have XXXXX columns:
• XXXXX
• XXXXX
• XXXXX
XXXXX.
11. XXXXX.
Ruling Requested
You would like to know if the operations of XXXXX are a feedlot operation which falls under section 164.1 or if the entire amount of the grazing fee is subject to GST.
Ruling Given
Based on the facts set out above, we rule that XXXXX is not operating a feedlot for the purposes of section 164.1. XXXXX is providing custom grazing services which are subject to GST pursuant to subsection 165(1).
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
As you are aware, there is specific legislation in regards to feedlot operations. Section 164.1, in combination with section 2.1 of Part IV of Schedule VI, allows that a portion (up to 90%) of a feedlot's total charge for taxable services that is reasonably "attributable to feed", be zero-rated.
In particular, pursuant to subsection 164.1(2), where, in the course of operating a feedlot that is a farming business within the meaning of the Income Tax Act, a person makes a supply of a service and the consideration for the supply (in this subsection referred to as the "total charge") includes a particular amount that is identified in the invoice or agreement in writing for the supply as being attributable to feed,
(a) the provision of the feed shall be deemed to be a supply separate from the supply of the service and not to be incidental to the provision of any other property or service;
(b) the portion, not exceeding 90%, of the total charge that is reasonably attributable to the feed and is included in the particular amount shall be deemed to be the consideration for the supply of the feed; and
(c) the difference between the total charge and the consideration for the supply of the feed shall be deemed to be the consideration for the supply of the service.
In order to qualify for the zero-rating of the feed provided to its customers under section 164.1, the business activities of XXXXX must meet three conditions:
1. it must be a farming business for income tax purposes;
2. it must be a feedlot; and
3. the feed provided must meet the definition of feed for this section.
Although XXXXX is a farming business for purposes of the Income Tax Act, it does not meet the two other conditions, as explained below.
For GST/HST purposes, a feedlot is considered to be a confined space (such as a pen, corral or a barn) where livestock are fed a concentrated diet for the purposes of producing a marketable animal. Where the intent of the boarding is for a different purpose than producing a marketable animal, and, where livestock are free to roam on pastureland and graze, the supply is not considered a feedlot operation for GST/HST purposes.
XXXXX is not a feedlot for GST/HST purposes for the following reasons:
• Although the animals are in a restricted area, they are not contained in pens and are free to roam.
• The animals are not fed a concentrated diet with the aim of producing a marketable animal.
• The animals are fed grass by grazing.
• After leaving XXXXX, the cattle go to a feedlot (finishing operation) prior to slaughter.
In order to be a feedlot, the feed supplied must meet the definition of feed for purposes of section 164.1, which is as follows:
a) grain, seed or fodder that is described in section 2 of Part IV of Schedule VI and used as feed for farm livestock that is ordinarily raised or kept to produce, or to be used as, food for human consumption or to produce wool;
b) feed that is a complete feed, supplement, macro-premix, micro-premix or mineral feed (other than a trace mineral salt feed), the supply of which in bulk quantities of at least 20 kg would be a zero-rated supply included in Part IV of Schedule VI, and
c) by-products of the food processing industry and plant or animal products, the supply of which in bulk quantities of at least 20 kg would be a zero-rated supply included in Part IV of Schedule VI.
Section 2 of Part IV of Schedule VI, zero-rates a supply of:
(a) grains or seeds in their natural state, treated for seeding purposes or irradiated for storage purposes,
(b) hay or silage, or
(c) other fodder crops,
that are ordinarily used as, or to produce, food for human consumption or feed for farm livestock or poultry, when supplied in a quantity that is larger than the quantity that is ordinarily sold or offered for sale to consumers, but not including grains, seeds or mixtures thereof that are packaged, prepared or sold for use as feed for wild birds or as pet food.
The above definitions of feed for purposes of section 164.1 and for purposes of section 2 of Part IV of Schedule VI do not include standing grass. Therefore, when standing grass is provided for nourishment to animals, it will not meet the definition of feed for purposes of operating a feedlot.
Therefore, the provision of XXXXX grazing system is not a feedlot operation and standing grass does not meet the definition of feed for feedlot purposes. The services provided by XXXXX are thus not applicable to the legislation regarding feedlots. The custom grazing services supplied by XXXXX are subject to GST calculated on the total charge for the supply, under the provisions of subsection 165(1).
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
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UNCLASSIFIED
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