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: 131193
October 17, 2011
Dear [Client]:
Subject:
GST/HST INTERPRETATION
Importation of certain packages of dehydrated vegetables, fruit, and grains.
Thank you for your letter of December 9, 2010, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the importation of certain packages of dehydrated vegetables, fruits, and grains.
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.
We understand that you would like to import packages containing various dehydrated foods into Canada for personal use and not for resale. You have stated that the dehydrated foods will be purchased from a variety of suppliers; you have provided one example but no sample. The example is [...] (the Product), supplied by [...] (the Company), of [Country X]. We cannot issue a single ruling on all dehydrated food items in general, rulings only apply to a clearly defined fact situation of the taxpayer and in the case of the Product certain facts are not available to us so we can only provide an interpretation. An interpretation will provide you with the general principles that can be applied to future importations of similar products.
Interpretation Requested
You would like to know if the importations of various dehydrated bulk food emergency preparedness kits are considered non-taxable importations for GST/HST purposes pursuant to section 6 of Schedule VII to the ETA and section 1 of Part III of Schedule VI to the ETA.
Interpretation Given
Generally, all goods imported into Canada are taxable for GST/HST purposes unless specifically relieved under section 213 of the ETA. Importations of goods relieved of tax under section 213 of the ETA are set out in Schedule VII to the ETA. Section 5 of Schedule VII to the ETA provides for the non-taxable importation of a good, the supply of which is zero-rated pursuant to section 1 of Part II of Schedule VI to the ETA.
Using the Product as an example, we will outline the principles involved in determining the GST/HST status of emergency preparedness kits in general.
The Product weighs [...] pounds, contains [...] cases of various food items or ingredients, and [...] and a cookbook [...] for a total of [...] cases. The Product is sold at a price range from [...] to [...] depending on delivery costs.
When a supplier makes supplies of a product comprised of various elements Canada Revenue Agency (CRA) first examines the product to determine whether it is a single supply or, in fact, multiple supplies. Often with food products various items are packaged together for sale as a unit and are considered a single supply. This is particularly the case with gift baskets comprised of food and/or beverage products. Your product is similar to gift baskets in that you have food products, the majority of which are zero-rated packaged together with some taxable food and non-food items. Together they comprise the Product.
CRA Policy statement P-077R2 Single and Multiple Supplies provides guidance in determining whether a supply consisting of several elements is a single supply, or two or more supplies. It is the CRA's position that, for GST/HST purposes, the determination of whether a transaction consisting of several elements is to be regarded as a single supply or multiple supplies is based on a determination of fact. For further information enclosed is a copy of P-77R2 Single and Multiple Supplies which discusses how to determine whether there is a single supply or there are multiple supplies.
No one individual characteristic determines if a product is a single or a multiple supply. In each case there are specific characteristics which may be weighed more heavily than others. In this case, the Product is comprised of a fixed number of packages comprised of a fixed combination of elements none of which can be substituted or altered. The intentions of the supplier and the recipient can shed light on the nature of the supply. In our particular example, it is the intention of the consumer to purchase the emergency preparedness elements in a single transaction and the intent of the supplier is to meet that demand. The Product is a single supply.
Once it is determined that the Product is a single supply, the next step is to determine the tax status of the single supply. The ETA provides for a zero-rated GST/HST status for the supply of basic groceries. Zero-rated basic groceries, including most supplies of food and beverages marketed for human consumption with specific exclusions. The Product is comprised of elements which are zero-rated basic groceries as well as other taxable food items and taxable non-food items.
The ETA does not provide for a single supply comprised of taxable and zero-rated items to be zero-rated. However, the CRA has a policy regarding single supplies comprised of zero-rated basic groceries and other items which may apply in this case. Where all or substantially all (e.g., 90% or more) of the value of the supply of the single supply is comprised of zero-rated goods, the tax status of the supply is zero-rated. Conversely, when the value of the component elements, each of which is taxable, exceeds 10% of the total value of the supply, the supply is taxable. Where it can be reasonably demonstrated that the items excluded from zero-rating are less than 10% of the total value of the single supply, the single supply of the product would be zero-rated. However, if the items excluded from zero-rating are greater than 10% or it cannot be reasonably demonstrated that these items are equal to or less than 10% of the value of the Product, the single supply would then be taxable.
Of the [...] elements in the package, the supply of [...] of them would be zero-rated. Of the other [...] elements of the kit, the supply of the cookbook would be taxable. Regarding [...], our research has shown that the [...] contain [...] and, among other ingredients, artificial flavour. The supply of fruit based snacks such as [...] is subject to the GST/HST under paragraph 1(l) of Part III of Schedule VI to the ETA which excludes such fruit based snacks.
Lastly, the supply of [...] crystals is unclear based on the information provided. Where the crystals, when added to water, make a beverage which is less than 25% by volume of natural fruit juice or a combination of natural fruit juices, the supply of the crystals is subject to the GST/HST. Reciprocally, where the resulting beverage is 25% or more, by volume, of natural fruit juice or a combination of natural fruit juices, the supply would be zero-rated.
The complete [...] elements of the product are: [...]
In the absence of information concerning the monetary value for each of the elements which comprise the Product, we are unable to provide a ruling on the application of the GST/HST to the Product. The monetary values are needed to determine whether the value of the three taxable elements exceeds 10% of the total value of the supply. Where it does the supply of the Product would be taxable. Where the value of the taxable elements is equal to or less than 10% of the value of the Product, the supply of the Product would be zero-rated.
Where it is determined that the supply of the Product is zero-rated pursuant to section 1 of Part III of Schedule VI to the ETA any importation of the Product is non-taxable for GST/HST purposed pursuant to section 6 of Schedule VII to the ETA.
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 613-954-5124. 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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