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: 126073
Business Number: XXXXX
Attention: XXXXX XXXXX
July 30, 2010
Dear XXXXX:
Subject:
GST/HST RULING AND INTERPRETATION
XXXXX
Thank you for your XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX (the Products).
HST applies at the rate of 15% in Nova Scotia, 13% in New Brunswick, Newfoundland and Labrador, and Ontario, 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 produces a wide array of consumer products, one of which is the XXXXX of feminine hygiene products.
2. The web site for XXXXX was reviewed and it contained a link for XXXXX which was consulted. There are a number of XXXXX feminine hygiene products: XXXXX.
3. I spoke to you on XXXXX, to confirm that it is the XXXXX which is named above, for which you are requesting this ruling.
4. The XXXXX is available in XXXXX sizes: XXXXX are available in scented or unscented versions.
5. The submission states that the Products are marketed exclusively for feminine hygiene purposes. Some of the most common uses for the Products are for menstrual back up, light adult incontinence and daily natural discharge.
6. The web site markets the Products by stating: "XXXXX."
7. XXXXX.
8. XXXXX is currently charging 13% and 12% HST on sales of the Products in Ontario and BC respectively.
9. On XXXXX, you sent a second fax to the Canada Revenue Agency (CRA). This fax was questioning the claiming of input tax credits (ITCs) by XXXXX customers for the HST paid on the Products, should CRA rule that the Products are eligible for the point-of-sale rebate. XXXXX customers are all GST/HST registrants, the company would appreciate if its customers could claim an ITC for the tax billed at 13%, 12% and 15%, rather filing for a rebate of the provincial component of the HST.
Rulings Requested
You would like to know:
1. If the Products are considered to be feminine hygiene products which would qualify for the point-of-sale rebate in British Columbia, Ontario and Nova Scotia.
2. If XXXXX customers in British Columbia, Ontario and Nova Scotia, who were charged the full amount of HST on the supply of the Products prior to receiving this ruling, can claim an ITC rather than filing for a rebate to recover the provincial part of the HST paid on the purchases.
Ruling Given
Based on the facts set out above, we rule that the Products are qualifying feminine hygiene products for purposes of the point-of-sale rebate provided by the governments of Ontario, British Columbia and Nova Scotia.
We are unable to provide you with a ruling regarding the claiming of ITCs by your customers as this question involves tax calculations (e.g., the amount of net tax due for GST/HST purposes). However, we have provided an interpretation on the subject raised in the question, which follows the Explanation for the ruling.
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
The provinces of Ontario, British Columbia and Nova Scotia have provided for a point-of-sale rebate of the provincial component of the HST payable on qualifying feminine hygiene products. The terms in which the provinces describe the qualifying feminine hygiene products are the same as the ones used in the federal Deduction for Provincial Rebate (GST/HST) Regulations (the Regulations). The Regulations permit, in conjunction with subsection 234(3), to offset such a rebate credited or paid by a supplier against the net tax remittance of the supplier. The feminine hygiene products which qualify for the rebate are described under section 1 of the Regulations to mean "a product that is marketed exclusively for feminine hygiene purposes and is a sanitary napkin, tampon, sanitary belt, menstrual cup or other similar product".
In order for a product to meet the definition of a "feminine hygiene product" for purposes of the rebate, the product must meet two conditions:
1) the product must be marketed exclusively for feminine hygiene purposes, and
2) the product must be a sanitary napkin, tampon, sanitary belt, menstrual cup or other similar product.
The term "feminine hygiene" is not defined in the ETA or the Regulations, but it is a general term used to describe personal care products used by women during menstruation, vaginal discharge and other bodily functions related to the vulva. Commonly accepted categories of feminine hygiene products are sanitary napkins, pantiliners, tampons, menstrual cups and feminine wipes.
The term sanitary napkin is also not defined in the ETA or the Regulations, and thus we use its common dictionary meaning. Sanitary napkins are generally understood to be an absorbent pad worn by a woman to absorb menstrual flow. Sanitary napkins are available in a number of different sizes and absorbency ranges (i.e., thin, regular, super/maxi, night time) to accommodate for the differences in body size and vaginal discharges in women.
Although the Products are generally thinner and smaller than a standard napkin, they are designed to absorb vaginal discharges. We are thus of the opinion that the Products are sanitary napkins or similar to sanitary napkins. As the Products are marketed exclusively for feminine hygiene purposes and are sanitary napkins or similar to sanitary napkins, they are qualifying feminine hygiene products for purposes of the point-of-sale rebate.
Interpretation Given
If the supplier does not pay or credit the rebate at the time of sale, the recipient, even if a registrant acquiring the qualifying goods for use or supply in a commercial activity, would have to file a rebate claim with the CRA using Form GST189, General Application for Rebate of GST/HST, to recover the provincial part of the HST. The recipient would have to file the form within four years from the time the HST became payable and would use reason code 16. The registrant recipient would not be able to claim an ITC for the provincial part of the HST.
The above are not administrative procedures, but are legislative requirements based upon the interaction of section 234, the Deduction for Provincial Rebate (GST/HST) Regulations and provincial legislation. Subsection 234(3) allows registrants who make supplies in a participating province to deduct, in determining their net tax, an amount equal to the prescribed amount they pay or credit to recipients on account of the tax payable on qualifying goods. The prescribed amount will equal the provincial part of the HST at the prescribed rate for each participating province.
Subsection 234(4) ensures that, since the crediting to a recipient of a prescribed amount reduces the tax paid by the recipient, the recipient is not entitled to claim the amount credited as an ITC, rebate or remission. These provisions ensure that there is no double counting of an amount which was paid or payable for goods which are eligible for the point-of-sale rebate.
Although your customers are not entitled to claim an ITC for the provincial part of the HST paid on the Products, you may wish to consider the following option. If a registrant charged HST on a supply which was eligible for the point-of-sale rebate and then after the date of that supply, including after payment by its customers, gives its customers a payment or credit of an amount equal to the provincial component of the HST, then the registrant supplier may deduct that amount in determining its net tax for the reporting period in which the amount was paid or credited.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
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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