6 March 2007 GST/HST Interpretation 86580 - XXXXX concerning an out-of-court settlement

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 importations of vitamin B12 (cyanocobalamin) XXXXX and vitamin B12 (cyanocobalamin) XXXXX

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

Additional information concerning product descriptions has been taken from XXXXX.

Statement of Facts

We understand XXXXX imports and distributes the following two products in Canada.

Cyanocobalamin vitamin B12, XXXXX supplied in standard XXXXX-kilogram fibre drums described as follows:

Vitamin B12 XXXXX is a XXXXX powder of cyanocobalamin XXXXX. XXXXX

•   This product is designed to circumvent difficulty of homogenous addition of low levels of vitamin B12 to foods and pharmaceuticals.

Vitamin B12 XXXXX supplied in standard XXXXX-kilogram fibre drums described as follows:

•   Vitamin B12 XXXXX is a fine, XXXXX powder. It consists of a high-potency vitamin B12 concentrate XXXXX.

•   This product is designed for use in animal nutrition in premixes and compound feeds.

Ruling Requested

You would like to know the GST/HST treatment of these two products when imported and supplied in Canada.

Ruling Given

Based on the facts set out above, we rule that Vitamin B12 XXXXX is a zero-rated supply pursuant to subsection 123(1) of the ETA as it is included in Part III of Schedule VI to the ETA. It is therefore a non-taxable import pursuant to section 6 of Schedule VII and section 213 of the ETA.

Vitamin B12 XXXXX is taxable at 6% (14% if supplied in a participating province) pursuant to subsection 165(1) of the ETA and is a taxable import under section 212 of the ETA.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are 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 to Her Majesty in right of Canada tax in respect of the supply calculated at the GST rate of 6% (or HST rate of 14%, as applicable) on the value of the consideration for the supply. Where, however, a supply is a zero-rated supply, the tax rate in respect of that supply is 0%.

The supply of basic groceries, which includes the majority of supplies of food and beverages marketed for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of such food or beverages), is zero-rated pursuant to Part III of Schedule VI to ETA.

Vitamins, minerals and additives sold as an ingredient in the manufacture of food or beverages for human consumption are zero-rated as ingredients for food or beverages for human consumption. Vitamin B12 XXXXX is therefore zero-rated. Furthermore, pursuant to section 6 of Schedule VII to the ETA and section 213 of the ETA, Vitamin B12 XXXXX is a non-taxable import.

With respect to the importation and supply of Vitamin B12 XXXXX, this good is not included in the zero-rated provisions of Part IV of Schedule VI to the ETA. Accordingly the taxing provisions of section 212 of the ETA would apply to this good.

Section 10 of Part IV of Schedule VI to the Excise Tax Act provides a zero-rated tax status for a supply of "prescribed property". The Agriculture and Fishing Property (GST/HST) Regulations (the "Regulations") prescribe property relating to agriculture and fishing.

Subsection 1(2) of the schedule to the Regulations prescribes the following:

(2) Feed, when sold in bulk quantities of at least 20 kg (44 lbs) or in bags that contain at least 20 kg (44 lbs), that

(a) is a complete feed, supplement, macro-premix, micro-premix or mineral feed (other than a trace mineral salt feed) all as defined in the Feeds Regulations, 1983

(b) is labelled in accordance with the Feeds Regulations, 1983 and

(c) is designed

(i) for a single species or class of farm livestock, fish or poultry ordinarily raised or kept to produce, or to be used as, food for human consumption or to produce wool, or

(ii) rabbits.

Vitamin B12 XXXXX would be classified as a single ingredient feed in accordance with the Feeds Regulations, 1983. Since these ingredients are not classified as a complete feed, supplement, macro-premix, micro-premix or mineral feed in accordance with the Feeds Regulations, 1983, they are not a zero-rated supply pursuant to subsection 1(2) of the schedule to the Regulations.

Furthermore, subsection 1(3) of the schedule to the Regulations prescribes the following:

(3) By-products of the food processing industry and plant or animal products, when sold in bulk quantities of at least 20 kg (44 lbs) or in bags that contain at least 20 kg (44 lbs), that are ordinarily used as feed, or as ingredients in feed, for farm livestock, fish or poultry described in subparagraph (2)(c)(i) or for rabbits, ostriches, rheas, emus or bees.

Vitamin B12 XXXXX does not qualify as a zero-rated supply under subsection 1(3) of the schedule to the Regulations.

For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 957-8220.

Yours truly,

Kevin W. Smith
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/03/13 — RITS 87992 — GST/HST Memoranda Series 4.3, Basic Groceries