Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Business Number: [...]
Case Number: 121861
April 13, 2011
Dear [Client]:
Subject:
GST/HST RULING
Medical foods
Thank you for your letter of February 18, 2010, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to medical foods (the Products). We apologize for the delay in this response.
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. [...] [Company A] is a customs broker acting on behalf of [...] [(Company B)] to determine the GST/HST status of certain medical foods. Your letter was sent to GST/HST Rulings [...] Region, [...] office, who began work on the ruling. The ruling request, due to its complexity, was subsequently transferred to the Excise and GST/HST Rulings Directorate in Ottawa for response.
2. You state that [Company B] is a non-resident importer engaged in the importation and sale of its [...]. [Company B] is located at [...] [Country X].
3. [Company B] is not registered for GST/HST purposes, but has been assigned Business Number [...] for import purposes. You state that as a non-resident, non-registered Canadian importer of record, [Company B] is responsible for the payment of duties and taxes, assessed by the Canada Border Services Agency, on the imported goods and is not entitled to claim input tax credits (ITCs). In addition you state that [Company B's] customers are engaged in the provision of exempt medical services and are also not entitled to claim ITCs.
4. As background, you state that a medical food is a food formulated for enteric administration under physician supervision and intended for the specific dietary management of a disease or condition for which distinctive nutritional requirements are established by medical evaluation. The [Company B] Products are foods that are specifically formulated and processed (as opposed to a naturally occurring foodstuff used in a natural state) for patients who are seriously ill or who require the Product as a major treatment modality.
5. You also state that [Company B] Products are only available by prescription from a medical practitioner. These Products are generally not intended to be used as a patient's sole source of nutrition.
6. On March 18 and 19, 2010, [...], the Rulings Officer from [...] was in contact by e-mail with [...], the Operations Coordinator with [Company B]. The Officer questioned if any of the Products were formulated liquid diets, meal replacements or nutritional supplements. A link was provided to the Food and Drugs Act and Regulations for review by [Company B].
7. The response by [the Operations Coordinator] stated that some of the Products in liquid form would qualify as "formulated liquid diets" as they contain [...] which would qualify as nutritionally complete. She also said that the Products are not labelled using the Food and Drugs Act terms, but are marketed and labelled as medical foods. She then quoted [...] [legislation of Country X].
8. The Web site for [Company B] [...] was reviewed and the information which follows was taken from this site.
9. [Company B] is dedicated to serving [...]. The company's range of products offers [...].
10. [Company B] understands the importance of dietary therapy for the treatment of [...] disorders and has developed a new generation of [...] for such conditions. [Company B] Products are easier and more convenient to prepare and offer a more discreet approach to disease management than other commercial formulas.
11. The Web site lists [...] categories of Products and the submission contains [...]. The following information regarding the [...] Product categories referenced in the submission was obtained from both the Web site and submission: [...]
12. The submission included the following six sample Products: [...] [Product 1]; [...] [Product 2]; [...] [Product 3]; [...] [Product 4]; [...] [Product 5]; and [...] [Product 6]. The next six facts contain detailed information about each of these Products obtained from the Product label, [...] Guide and the Web site.
13. [Products 2 and 1] are packaged in a resealable [...] containing [...]ml [...] and [...]ml [...] of the liquid Product. The Product is available in [...] flavours: [...]. The only wording contained on the labels is: [...]
The [...] is one product in [...] pack sizes. It is [...] ready to drink, [...]. Each pack provides the same nutritional content per [...]ml providing proportionally different quantities of total protein and micronutrients. Each size is sold in a pack size of [...].
The ingredients of the [...] flavour Product are: [...]
The [...] contains (in part) the following information about the Product: [...]
14. [Product 3] is packaged in [...] which is not resealable. The packet contains [...]g, is sold in packs of [...] and is available in [...] varieties [...]. The only labelling on the package is [...].
The Product is a [...] and must be mixed with [...] to ingest. The preparation guidelines are provided on the Web site. The Product is a [...]. The ingredients for this Product are similar to those listed for the [...] above. The Web site for the Product also contains similar warnings as those for the [Products 1 and 2].
15. [Product 4] is sold in a pack which contains [...] unresealable [....] each containing [...]g. The Product is a [...]. It is designed to be made into a [...] and is sold with a [...]. As with the other Products listed above, it must be given to patients with proven [...] under strict medical supervision. It is not recommended for infants under 12 months of age.
16. [Product 5] is a [...] for use in the dietary management of [...]. The sample contains [...]g in a [...] with only the [...]. The Product is sold in a pack size of [...] x [...]g [...]. The [...] describes the Product as [...].
The dosage of the Product is to be determined by the [...] and is dependent on the age, bodyweight and medical condition of the patient. The Product must be used under strict medical supervision. The Product can be [...].
17. [Product 6] is packaged in [...] containing [...]g and is sold in boxes containing [...]. [...]. The Product may only be given to patients with proven [...] and under strict medical supervision. It is not to be used as a sole source of nutrition.
18. [Company B] maintains that the Products are foods "for special dietary use" as defined in the Food and Drug Act and Regulations (FDR). These Products are specially formulated to meet the dietary requirements of persons with [...]. As such, it is [Company B's] position that these goods should be zero-rated as basic groceries and no GST/HST should be payable upon importation to Canada.
Ruling Requested
You would like to know if the Products are zero-rated under the ETA as basic groceries or zero-rated under another provision.
Ruling Given
Based on the facts set out above we rule that supplies of the Products are zero-rated supplies pursuant to section 1 of Part III of Schedule VI, and therefore are taxable at 0% pursuant to subsection 165(3).
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 on the value of the consideration for the supply at the rate of 15% in Nova Scotia, 13% in New Brunswick, Newfoundland and Labrador and Ontario, and 12% in British Columbia (the HST rates in the participating provinces). GST applies at the rate of 5% in the remaining provinces and territories. The GST/HST applies 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 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.
As none of the exclusions under section 1 of Part III of Schedule VI will apply to the Products, supplies of the Products are zero-rated.
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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