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: 127069
Business Number: [...]
January 24, 2011
Dear [Client]:
Subject:
GST/HST RULING
GST/HST Status of Baked Goods
Thank you for your letter of August 3rd, 2010 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to bakery items sold by [...] [(the Company)]; [names of four bakery items].
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
We understand the facts are as follows:
1. [...] has requested a ruling regarding the tax status of four bakery items sold by [the Company]; [...] (Product A), [...] (Product B), [...] (Product C), and [...] (Product D): collectively "the Products".
2. The Client is registered for GST/HST purposes [...].
3. The Products are sold to consumers [...].
4. The Products are made on site with ingredients and labour [...].
5. The Products are all sold ready to serve in single servings.
6. Product A ingredients are: [...].
7. Product B ingredients are: [...].
8. Product C ingredients are: [...].
9. Product D ingredients are: [...].
Ruling Requested
You would like to know how the GST/HST applies to the supply of the Products.
Ruling Given
Based on the facts set out above, we rule that the Products are zero-rated pursuant to subsection 165(3) and Section 1 of Part III of Schedule VI.
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
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 to be mixed with or used in the preparation of such food or beverages) other than supplies listed in paragraphs (a) to (r) of that section. Paragraph (m) excludes from zero-rating single servings of baked goods such as cakes, muffins, pies, pastries, etc. However, paragraph (m) does not apply to bread products such as bagels, English muffins, croissants or bread rolls that do not have a sweetened coating or filling.
We have reviewed the Products based on their ingredients, cooking methods, and pictures. The main ingredients in each of the Products are flour, water, yeast/baking powder, and dried unsweetened fruit. When all the ingredients are combined the result is dough that is formed by hand, placed on a baking sheet and placed in the oven. From the ingredients, it can be seen that the products are similar with no significant differences to scones and tea biscuits, and will be treated similarly. Scones and tea biscuits are small quick breads consisting primarily of wheat, barley or oatmeal, with baking powder or yeast as a leavening agent. The Products are similar to the listed examples (scones and tea biscuits without sweetened fillings or coatings) of zero-rated supplies in paragraph 94 of Memoranda Series 4.3 Basic Groceries thus they are not considered to be 'sweetened goods'' for the purpose of paragraph 1(m) of Part III of Schedule VI to the ETA.
Paragraph 90 of Memoranda Series 4.3 states "The term sweetened filling includes any sweetening ingredient (other than unsweetened fruit) added as a filling, but excludes sweetened products added merely as a catalyst for leavening agents (known as yeast foods)". The Products are accepted as unsweetened through evaluation of the ingredients list of each, thus are not included in the exception to zero-rating in paragraph 1(m) of Part III of Schedule VI to the ETA.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-5124. 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,
Angela Stachowski
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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