28 April 2006 GST/HST Ruling 79170 - Application of the GST/HST on Supplies of Food or Beverages for Human Consumption

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 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your product XXXXX (Product A).

All legislative references are to the Excise Tax Act (the Act) and the regulations therein, unless otherwise specified.

Statement of Facts

Product A

1. Product A ingredients are: Enriched flour (wheat flour, niacin, reduced iron, thiamin mononitrate [vitamin B1], riboflavin [vitamin B2], folic acid), vegetable oil (canola, cottonseed palm, sunflower and/or partially hydrogenated soybean oil with XXXXX, XXXXX (skim milk, whey protein, cheese cultures, salt, enzymes, annatto extract for color), contains two percent or less of milk, salt, paprika, yeast, paprika oleoresin for color, cheese cultures, soy lecithin.

2. Product A is labelled as XXXXX.

3. Product A is sold in a box containing XXXXX.

Ruling Requested

You would like to know the tax status of Product A for GST/HST purposes?

Ruling Given

Based on the facts set out above, we rule that Product A is zero-rated (taxable at 0%) pursuant to subsection 165(3) and section 1 of Part III of Schedule VI to the Excise Tax Act (the "Act[)].

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

Taxable supplies of goods and services made in Canada are generally subject to tax at 7% (or 15% where the supplies are made in one of the provinces participating in the HST). 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 Excise Tax Act ("the Act").

Section 1 of Part III of Schedule VI to the Act zero-rates supplies of food or beverages for human consumption ("basic groceries") and sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, unless one of the exceptions set out in paragraphs 1(a) through 1(r) applies.

In accordance with paragraph 1(f) of Part III of Schedule VI of the Act, the following products are taxable at 7% (or 15%):

"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".

To determine whether the product is similar to snack foods described under paragraph 1(f), we consider the following factors: properties (ingredients, flavours, texture, cooking process, size & shape), labelling, packaging and marketing.

The above facts demonstrate that Product A has different properties than those found in products enumerated under paragraph 1(f). Furthermore, the omission of words on the labelling and marketing material of Product A that are usually used with products enumerated under paragraph 1(f), indicates that Product A is not similar to those products enumerated under 1(f).

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).

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-9585 or Costa Dimitrakopoulos at (613) 954-4397.

Yours truly,

Gabrielle Nadeau
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2006/04/06 — RITS 78790 — Interest on Outstanding Rent