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.
GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 200481
Dear [Client]:
Subject: GST/HST RULING
[…][Whether zero-rated as basic groceries]
Thank you for your correspondence dated June 13, 2019, concerning the application of GST/HST to [...](Product A), […](Product B), […](Product C), and […](Product D). We apologize for our delay in responding.
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.
STATEMENT OF FACTS
1. […](the Company) is an online retailer.
2. The Company promotes itself as a supplier of gourmet coffees, tea, and dietary supplements.
3. […].
4. We have reviewed the website referenced in your submission, […]
5. The ingredients for the products are as follows:
Product A: […].
Product B: […].
Product C: […].
Product D: […].
6. Marketing for Product A states that it can help […].
7. The packaging of Product A contains a supplemental facts table and directions […].
8. Marketing for Product B represents the product as a premium coffee and states that it can help […].
9. The packaging of Product B contains a nutritional facts table and directions […].
10. Marketing for Product C includes claims that the product can help […].
11. The packaging of Product C contains a supplement facts table and directions […].
12. Marketing for Product D represents the product as a green tea and states that it can help […].
13. Directions on the packaging for Product D advise the following: […].
RULING REQUESTED
You would like to know if supplies of Product A, Product B, Product C and Product D are zero-rated supplies under section 1 of Part III of Schedule VI.
RULING GIVEN
Based on the facts set out above, we rule that supplies of Product A, Product B, Product C, and Product D, are not supplies of basic groceries. Therefore, supplies of these products are not zero-rated under section 1 of Part III of Schedule VI.
EXPLANATION
Generally, in accordance with section 165, every recipient of a taxable supply made in Canada is required to pay GST/HST on the value of the consideration for the supply. Zero-rated supplies (listed in Schedule VI) are subject to the GST/HST at the rate of 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), other than supplies included in paragraphs (a) to (r) of that section.
The words “food”, “beverages” and “ingredients” are not defined in the ETA. The Canada Revenue Agency (CRA) considers that a product will be a food or beverage if an average consumer would recognize and purchase the product as a food or beverage in the ordinary course of buying basic groceries. Consumers usually consume food for enjoyment or to allay hunger, while beverages are usually consumed for enjoyment or to quench thirst.
The CRA considers a product to be an ingredient if an average consumer would recognize the product as an ingredient into food or a beverage. Generally, it is the view of the CRA that an average consumer would consider a product to be an ingredient if the product adds to the flavour, texture or appearance of the final product; that is, if it is integral to the final product. Moreover, in order to be regarded as an ingredient to a food or beverage, the final product, in and of itself, would have to be considered to be a food or beverage by the average consumer.
Memorandum 4.3 describes dietary supplements as supplies consumed for their therapeutic or preventative effects, or to achieve specific beneficial effects related to performance or physique. Food and beverages are usually consumed by an average person to sustain or maintain life, to allay hunger or thirst, or for enjoyment. Products commonly referred to as dietary supplements are not considered to be basic groceries and are not within the scope of section 1 of Part III of Schedule VI.
Dietary supplements may be made from natural or synthetic ingredients and include products such as vitamins, minerals, tonics, fibre, protein, amino acids, fatty acids, enzymes, herbal supplements, or compounds derived from plant or animal products. Dietary supplements are available in various forms including, but not limited to, tablet, pill, capsule, powder, liquid, gel, wafer and concentrates.
Product B and Product D both contain the ingredient […], which is a product most commonly promoted for its weight loss properties. The labelling and marketing of the products include claims that the products are consumed for the primary purpose of weight loss or maintenance. More specifically, marketing for Product B includes claims that it helps […]. Marketing for Product D includes claims that it helps […].
Similarly, Product A and Product C contain the active ingredient […], which is characterized as a medicinal ingredient by Health Canada in its Natural Health Products Ingredients Database. Marketing for these products identifies their use […].
Therefore, as Product A, Product B, Product C and Product D are all consumed and marketed primarily for their therapeutic and health benefits, supplies of each of these products are not zero-rated under section 1 of Part III of Schedule VI and would be subject GST/HST at the applicable rate based on the place supply.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the CRA is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-429-1696. 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,
Siraj Patel, CGA, CPA
Senior Rulings Officer
Basic Groceries and Recaptured Input Tax Credits Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate
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