13 February 2006 GST/HST Interpretation 76852 - Input tax credits and restriction for meals and entertainment

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 a certain supply of fresh fruit in a bowl ("the Product").

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

Statement of Facts

Our understanding of the facts is as follows:

1. The Product, XXXXX, is prepared XXXXX for sale to consumers.

2. The Product sold to consumers consists of fresh whole XXXXX, with green removed, and fresh XXXXX.

3. The product is sold to consumers in two sizes. A XXXXX bowl containing XXXXX and XXXXX-cored and cut XXXXX and a XXXXX bowl containing XXXXX and XXXXX-cored and cut XXXXX.

4. The Product's ingredients are packaged side by side in a plastic bowl.

5. The Product is not sold with a dip.

Ruling Requested

You would like to know the application of the GST/HST to a supply of the Product.

Ruling Given

Based on the facts set out above, we rule that supplies of the Product are taxable at 7%, or 15% in a participating province, pursuant to section 165 of the ETA.

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

Generally, every recipient of a taxable supply made in Canada shall pay tax calculated at the rate of 7% on the value of the consideration for the supply, or 15% in a participating province, unless the supply is zero-rated, pursuant to section 165 of the ETA. The tax rate in respect of a zero-rated supply is 0%, where a zero-rated supply is a supply that is included in Schedule VI to the ETA.

Under Part III of Schedule VI to the ETA, certain supplies of basic groceries are zero-rated. 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), other than supplies included in paragraphs (a) to (r) of that section. Paragraph 1(o.1) excludes supplies of salads not canned or vacuum sealed from zero-rating.

The Canada Revenue Agency provides information on supplies of basic groceries in our Memoranda Series 4.3, Basic Groceries. Paragraphs 86 to 92 of Memoranda Series 4.3 outline how the GST/HST applies to supplies of salads.

Paragraph 87 states:

Salads are considered to include food containing ingredients such as chopped, shredded, diced, sliced, or pureed vegetables, meat, fish, egg, or other food supplied with a dressing and/or seasoning(s), whether or not the dressing is mixed with the other ingredients. The only exceptions to this rule are fruit salads and gelatin salads that, generally, do not need a dressing. In addition, a combination of one ingredient mixed with a dressing or seasoning(s), which is sold or represented as a salad is also considered to be a salad.

It is our view that a fruit salad is considered to be comprised of whole fruit, fruit portions or fruit pieces of two or more types of fruit with or without dressing. A product that is only one fruit is not considered a salad. In this case, the Product consists of two types of fruit that have been prepared for consumption and which are contained in a clear plastic bowl that can be used as serving ware. Therefore, supplies of the Product are taxable at 7%/15%.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-8814.

Yours truly,

Robert Douthwright, CGA
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2006/02/14 — RITS 77000 — Entitlement to Input Tax Credits on Isolated Location Allowances