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.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 200159
Dear [Client]:
Subject: GST/HST INTERPRETATION
[Whether zero-rated] - Supply of […][an Industrial Hemp Product]
Thank you for your letter of May 27, 2019, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the supply of […][the Product]. We apologize for the delay in responding to your enquiry.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We understand that:
1. […][X] is a GST/HST-registered corporation based in […][the Province].
2. [X]’s principal activity is farming and related processes that preserve the quality of [X]’s farm products to make them usable by users who then make consumer products for sale to the public.
3. [X] sells its farm products to businesses only and not to consumers or the general public.
4. [X] was licenced under the Industrial Hemp Regulations of the Cannabis Act to cultivate and sell [the Product].
5. Industrial hemp is defined in subsection 1(2) of the Industrial Hemp Regulations of the Cannabis Act as “a cannabis plant - or any part of that plant - in which the concentration of THC (delta-9-tetrahydrocannabinol) is 0.3% w/w or less in the flowering head or leaves”.
6. [X] dries the mature stalks of the hemp plant of the genera Cannabis, which may include some leaves, flowers, seeds, or branches. [X] then maintains the quality of the mature stalks through a proprietary preparation and preservation procedure. This process does not result in a chemical change to the mature stalks, but simply involves drying and preserving their quality. [X] then grinds/minces the dried and preserved mature stalks (the Product), but does not further process the Product in any way.
7. You state that the Product maintains the required THC levels as regulated by subsection 1(2) of the Industrial Hemp Regulations while it is in [X]’s possession.
8. The Product is sold to licenced cannabis processors who process it primarily to extract CBD oil. The sold Product continues to be composed predominately of mature stalks of the hemp plant of the genera Cannabis, but may include some leaves, flowers, seeds, or branches of the plant. The Product is not intended to be used as animal feed.
INTERPRETATION REQUESTED
You would like to know if the sale of the Product is zero-rated under section 3.1 of Part IV of Schedule VI.
INTERPRETATION GIVEN
Generally, all supplies of property and services made in Canada are taxable unless they are relieved. Taxable supplies may be taxable at the rate of 0% (zero-rated supplies), 5%, 13%, or 15%, depending on the province in which the supply is made. Exempt supplies are not subject to the GST/HST and are included in Schedule V. Zero-rated supplies are included in Schedule VI.
Section 3.1 of Part IV of Schedule VI zero-rates a supply of grain or seeds, or of mature stalks having no leaves, flowers, seeds or branches, of hemp plants of the genera Cannabis, if
(a) in the case of grain or seeds, they are not further processed than sterilized or treated for seeding purposes and are not packaged, prepared or sold for use as feed for wild birds or as pet food;
(b) in the case of viable grain or seeds, they are included in the definition industrial hemp in section 1 of the Industrial Hemp Regulations made under the Controlled Drugs and Substances Act or they are industrial hemp for the purposes of the Cannabis Act; and
(c) the supply is made in accordance with the Controlled Drugs and Substances Act or the Cannabis Act, if applicable.
Whether the Product is considered mature stalks of hemp plants of the genera Cannabis as defined by the Industrial Hemp Regulations and the Cannabis Act is a question of fact to be determined by the appropriate authorities. However, supplies of dried and preserved mature stalks that include leaves, flowers, seeds, or branches of hemp plants of the genera Cannabis do not meet the requirements of section 3.1 of Part IV of Schedule VI, and therefore do not qualify for zero-rating under this provision.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-242-9234. 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,
Jill McDonald
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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