23 December 2004 GST/HST Ruling 54513 - Tax Status of XXXXX

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX, with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of XXXXX Bars (Product A) and XXXXX Beverages (Product B).

Statement of Facts

Our understanding of the facts is as follows:

1. Product A is:

•   available in a XXXXX g bar.

•   XXXXX and is labeled as a convenient XXXXX snack.

2. XXXXX sells Product A in XXXXX and XXXXX flavours.

3. Product B is:

•   packaged in XXXXX ml cans and is sold either individually or in cases containing XXXXX cans.

•   XXXXX and is labeled as a convenient XXXXX snack.

4. XXXXX sells Product B in Chocolate, Vanilla and Strawberry flavours.

Ruling Requested

You have requested a ruling concerning the application of the GST/HST to the supply of Products A and B.

Ruling Given

Based on the facts set out above, we rule that the supply of Product A is taxable at 7% GST or 15% HST, as applicable, pursuant to section 165 of the Excise Tax Act (ETA).

We also rule that the supply of Product B in Strawberry flavour is taxable at 7% GST or 15% HST, as applicable, and that the supply of Product B in Chocolate and Vanilla flavour is taxable at 7% GST or 15% HST, as applicable, when sold in single servings and zero-rated when sold in manufacturers cases of XXXXX cans.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the ETA, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Taxable supplies of goods and services made in Canada are generally subject to tax at 7% GST or 15% HST, as applicable. However, "zero-rated" supplies of goods and services are subject to tax at 0%. A zero-rated supply is any supply included in Schedule VI to the ETA.

Section 1 of Part III of Schedule VI to the ETA 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 one of the exclusions set out in paragraphs 1(a) through 1(r) applies.

Paragraph 1(e) of Part III of Schedule VI to the ETA excludes the following products from zero-rating:

"candies, confectionery that may be classed as candy, or any goods sold as candies, such as candy floss, chewing gum and chocolate, whether naturally or artificially sweetened, and including fruits, seeds, nuts and popcorn when they are coated or treated with candy, chocolate, honey, molasses, sugar, syrup or artificial sweeteners."

Product A is sold as a snack bar and has a chocolate flavoured coating. Product A is considered to be a product included paragraph 1(e) and is therefore excluded from zero-rating and taxable at 7% GST or 15% HST, as applicable.

Paragraph 1(d) of Part III of Schedule VI to the ETA excludes the following products from zero-rating:

"non-carbonated fruit juice beverages or fruit flavoured beverages, other than milk-based beverages, that contain less than 25% by volume of

(i) a natural fruit juice or combination of natural fruit juices, or

(ii) a natural fruit juice or combination of natural fruit juices that have been reconstituted into the original state,

or goods that, when added to water, produce a beverage included in this paragraph"

Product B, when supplied in Strawberry flavour, is considered to be a beverage included in paragraph 1(d) and is therefore excluded from zero-rating and taxable at 7% GST or 15% HST, as applicable.

Paragraph 1(n) of Part III of Schedule VI to the ETA excludes the following products from zero-rating:

"beverages (other than unflavoured milk) or pudding, including flavoured gelatine, mousse, flavoured whipped dessert product or any other products similar to pudding, except

(i) when prepared and prepackaged specially for consumption by babies,

(ii) when sold in multiples, prepackaged by the manufacturer or producer, of single servings, or

(iii) when the cans, bottles or other primary containers in which the beverages or products are sold contain a quantity exceeding a single serving"

Product B, when supplied in Chocolate and Vanilla flavour, is considered to be a beverage included in paragraph 1(n) and is therefore excluded from zero-rating and taxable at 7% GST or 15% HST, as applicable, when sold in single servings. Pursuant to subparagraph 1(n)(ii), Product B is zero-rated when sold in cases of XXXXX cans prepackaged by the manufacturer.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9585.

Yours truly,

Nicole Thomas, CMA
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

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