23 December 2004 GST/HST Ruling 54536 - Supply of Three Varieties of Organic Flax Oil

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 three varieties of organic flax oil.

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX (Product A):

•   Is available in a XXXXX ml container.

•   Packaging states: XXXXX.

•   Packaging states: XXXXX.

•   Directions for use are: XXXXX.

•   Ingredients are: XXXXX.

•   Other ingredients listed are: XXXXX.

2. XXXXX (Product B):

•   Is available in a XXXXX ml container.

•   Packaging states: XXXXX.

•   Packaging states: XXXXX.

•   Directions for use are: XXXXX.

•   Ingredients are: XXXXX.

3. XXXXX (Product C):

•   Is available in a XXXXX L container.

•   Packaging states: XXXXX.

•   Packaging states: XXXXX.

•   Directions for use are: XXXXX.

•   Ingredients are: XXXXX.

Ruling Requested

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

Ruling Given

Based on the facts set out above, we rule that all supplies of Products A, B and C are zero-rated as basic groceries.

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 Excise Tax Act (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.

The terms "food", "beverage" and "ingredient" are not defined in the ETA. However, the position of the Canada Revenue Agency (CRA) is that these terms are to be construed according to their ordinary meaning. Generally, it is the view of the CRA that an average consumer would consider a product to be an ingredient if the product added to flavour, texture or appearance of the final product; that is, if it was 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, must be considered to be a food or beverage by the average consumer.

Based on the suggested uses identified on the product packaging for the above products, the CRA considers Products A, B and C to be ingredients. As such, they are within the preamble to Section 1 of Part III of Schedule VI to the ETA and are zero-rated.

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

2004/11/29 — RITS 54669 — Section 186 of the Excise Tax Act