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: 128489
Business Number: [...]
March 21, 2011
Dear [Client]:
Subject:
GST/HST RULING
Tax Status of [...] [Fruit Bars]
Thank you for your letter of September 15, 2010, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to [...] [Fruit Bars] (the Product).
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 to be as follows:
1. The Product is individually wrapped fruit bars packaged in a box of [...] totalling [...] grams, consisting of [...] different flavours: [...]
2. The Product's physical composition is dried fruit and spices compressed into a rectangular bar.
3. The ingredients for each flavour are: [...]
4. The label states: [...]
5. The Product is on display in a typical supermarket with nutritional, protein and energy bars.
6. [...] [Client's comments about the Product]
Ruling Requested
You would like to know how the GST/HST applies to supplies of the Product.
Ruling Given
Based on the facts set out above, we rule that supplies of the Product are taxable at 5% GST, or 12%, 13%, or 15% HST pursuant to section 165 of the ETA.
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 at the rate of 5% on the value of the consideration for the supply (15% in Nova Scotia, 13% in Ontario, New Brunswick, Newfoundland and Labrador, and 12% in British Columbia) unless the supply is zero-rated. The tax rate in respect of a zero-rated supply is 0%.
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) unless an exclusion set out in paragraphs 1(a) through 1(r) applies.
Based on the information provided, the Product is considered a fruit bar and excluded from zero-rating by virtue of paragraph 1(l) of Part III of Schedule VI to the ETA. Paragraph 1(l) specifically excludes fruit bars, rolls or drops or similar fruit-based snack foods from zero-rating. Paragraphs 85 and 86 of Memoranda Series 4.3, Basic Groceries, state that supplies of fruit bars, rolls, or drops or similar fruit-based snack foods (in solid or semi-liquid form) are taxable. Examples include fruit leathers, dried fruit bars, and similar products that are 100% fruit or have fruit as a significant ingredient. Fruit bars may include one or more fruits or may include fruit in combination with vegetables, grains, nuts or seeds.
[...]
In respect of the Product being a cereal bar, paragraph 1(h) of Part III of Schedule VI excludes from zero-rating: granola products, but not including any product that is sold primarily as a breakfast cereal. Further information is found in paragraph 65 of Memoranda Series 4.3, which states bars that contain a mixture of cereals and honey and/or syrup, where the ingredients have been processed to the point that they have lost their distinct character, are not considered granola bars, but rather cereal bars or muffin bars. Considering that the Product's main ingredient is fruit, and that it does not contain cereal, and is not marketed as a cereal bar, it is not considered to be a cereal bar for purposes for paragraph (h).
The exception for products sold in quantities of six or greater is only relevant for the products in paragraph 1(m) of Part III of Schedule VI. Paragraph 1(m) excludes cakes, muffins, pies, pastries, tarts, cookies, doughnuts, brownies, croissants with sweetened filling or coating, or similar products from being zero-rated where: (i) they are pre-packaged for sale to consumers in quantities of less than six items each of which is a single serving, or (ii) they are not pre-packaged for sale to consumers and are sold as single servings in quantities of less than six. As the Product has been determined to be a fruit bar, it is excluded from the category of products listed in paragraph 1(m) of Part III of Schedule VI, and therefore paragraph 1(m) is not applicable.
In respect of your comment that the Product is a meal replacement or nutritional supplement, products that qualify, and are labelled as "nutritional supplements" or "meal replacements" pursuant to the Food and Drugs Act and Regulations are considered food or beverages for purposes of section 1 of Part III of Schedule VI. The Food and Drug Act and Regulations set out the conditions related to energy and essential nutrients that must be met for products to qualify as nutritional supplements and meal replacements. Food and Drug Regulations define meal replacement as being a formulated food that by itself, can replace one or more daily meals, and nutritional supplements as being a food sold or represented as a supplement to a diet that may be inadequate in energy and essential nutrients. Paragraph 162 of Memoranda Series 4.3 states that energy bars, and protein bars that qualify as meal replacements or nutritional supplements are zero-rated except when sold from vending machines.
In the two preceding situations, the Product would be required to meet the standards of the Food and Drug Act and Regulations that are set forth in paragraph 160 of Memoranda Series 4.3. If a product is represented as being a meal replacement, nutritional supplement or formulated liquid diet product as evidenced by the label, the CRA will accept this information as fact in determining its tax status. Although the label on the packaging of the Product indicates that the Product is a [...] it is not represented as a meal replacement or a supplement to a diet that is inadequate in energy and essential nutrients.
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
Email this Content