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
Case Number: 125051
August 18, 2011
Dear [Client]:
Subject:
GST/HST INTERPRETATION
Tax status of baby/infant gift sets
Thank you for your fax of June 3, 2010 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of baby/infant gift sets. We regret the delay in responding to you.
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.
We understand that [...] [the Company] sells gift sets in [...] [Participating Province X] which are comprised of some elements which qualify for a point-of-sale rebate for the provincial component of the HST in [Participating Province X] (POS rebate) for children's clothing and others which are not. A typical gift set includes clothing for babies or infants and baby or infant accessories or toys. The gift sets sometimes are packaged in a wicker basket.
Interpretation Requested
You would like to know how to treat the supply of a gift set sold for a single consideration for purposes of the POS rebate where some items, when supplied separately, qualify for the POS rebate on children's clothing and others do not.
Interpretation Given
The CRA has a policy on the application of GST/HST for determining the tax status of the supply of gift baskets. That policy is that when all or substantially all (e.g., 90% or more) of the value of the supply of a gift basket is zero-rated, the tax status of the supply is zero-rated. Conversely, when the value of the component parts, each of which is taxable, exceeds 10% of the total value of the supply, the supply is taxable. Historically, that policy applied only where there was a gift basket composed of taxable and zero-rated groceries. With the advent of the POS rebate, the CRA is extending the gift basket treatment to gift baskets comprised of items which qualify for the POS rebate and items which do not. For clarity, we consider a gift set to be similar to a gift basket.
Consequently, our position is that where all or substantially all of the value of the items of a gift basket or gift set is attributable to items which qualify for a POS rebate, the supply of the gift basket or gift set qualifies for the POS rebate. Where 10% or more of the value of the items of a gift basket or gift set is attributable to items which do not qualify for the rebate, the supply of the gift basket or gift set does not qualify for the POS rebate.
We were not provided with the value of the elements in your particular gift baskets, therefore we could not provide a definitive ruling on the application of the HST to the supply of these gift baskets. However, if 90% or more of the value of a gift basket is attributable to items for which a POS rebate in [Participating Province X] applies, the supply of the gift basket will not be subject to the provincial portion of the HST and will only be subject to the federal portion of the HST.
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 Canada Revenue Agency 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 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
Senior Rulings Officer
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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