23 December 2004 GST/HST Interpretation 56621 - Eligibility by an Orthodontist for Input Tax Credits

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 supplies of XXXXX (the Product).

Statement of Facts

Our understanding of the facts is as follows:

1. The Product is a baked XXXXX cracker snack that is available in XXXXX varieties: XXXXX.

2. Ingredients of the XXXXX flavour of the Product are: XXXXX.

3. The Product is labelled as a XXXXX cracker and is packaged loosely in XXXXX gram bags.

4. You suggest the Product be shelved with rice cakes in the supermarket.

5. Packaging includes statements such as XXXXX and XXXXX.

6. The product information sheet indicates that the Product is:

•   XXXXX.

•   XXXXX.

•   XXXXX.

•   XXXXX.

•   XXXXX.

7. The Product XXXXX.

8. Results from independent market research as provided on the product information sheet indicates that:

•   XXXXX.

•   XXXXX.

•   XXXXX.

•   XXXXX.

•   XXXXX.

Ruling Requested

You requested the tax status of the Product.

Ruling Given

Based on the facts set out above, we rule that supplies of the Product are taxable at 7% GST or 15% HST, as applicable.

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

Generally, every recipient of a taxable supply made in Canada shall pay to Her Majesty in right of Canada tax in respect of the supply calculated at the GST rate of 7% or HST rate of 15%, as applicable, on the value of the consideration for the supply. However, zero-rated supplies of goods and services are subject to tax at 0%. Section 1 of Part III of Schedule VI to the ETA zero-rates supplies of basic groceries subject to the exclusions listed in paragraphs 1(a) through 1(r).

Paragraph 1(f) excludes from zero-rating supplies of:

"chips, crisps, puffs, curls or sticks (such as potato chips, corn chips, cheese puffs, potato sticks, bacon crisps and cheese curls), other similar snack foods or popcorn and brittle pretzels, but not including any product that is sold primarily as a breakfast cereal".

GST/HST Policy Statement P-241 - Meaning of "Other Similar Snack Food" under paragraph 1(f) of Part III of Schedule VI to the ETA, provides several factors that may be used to determine if a product is a similar snack food. These factors include: properties (ingredients, flavours, texture, cooking process and appearance), labelling, packaging and marketing.

In this case, the Products main ingredients are XXXXX, which are consistent with the snack foods enumerated in paragraph 1(f). In addition, the Product is available in flavours typically associated with these snack foods. Furthermore, the appearance (small, thin slice), shape and the texture (crunchy) are similar to those products enumerated under paragraph 1(f).

The Product label includes the term "chip", is packaged loosely in a bag and is marketed to compete with chips. Although we consider placement of a product in store aisles as a relevant consideration, it alone is not considered a determinative factor.

Having reviewed the facts of this case, it is the opinion of the CRA that the Product is an "other similar snack food" as listed in paragraph 1(f) of Part III of Schedule VI to the ETA and as such supplies of the product are taxable at 7% GST or 15% HST, as applicable.

It should be noted that no one factor is determinative of the tax status of a product and changes in the labelling, packaging and/or marketing would not necessarily result in a different tax status. That is, all factors must be considered in determining whether a product falls within paragraph 1(f).

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

2004/12/23 — RITS 56819 — Temporary Importation of Amusement Rides