14 February 2008 GST/HST Interpretation 98614 - Documentary Requirements for FCTIP Rebate

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 sent to the XXXXX GST/HST Rulings Centre, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of dried fruit.

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

Effective January 1, 2008, the rate of the GST has been reduced from 6% to 5% and the rate of HST from 14% to 13%. The new rates apply to supplies for which the GST/HST is paid on or after January 1, 2008, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to GST/HST Notice 226, GST/HST Rate Reduction in 2008 on the Canada Revenue Agency (CRA) Web site at www.cra-arc.gc.ca/E/pub/gi/notice226/README.html.

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX is registered for GST/HST purposes under business number XXXXX.

2. XXXXX will be selling individual XXXXX g packages of dried fruit as well as boxes containing XXXXX and XXXXX of these packages of dried fruit.

3. XXXXX of XXXXX's dried fruit products are composed of single fruits which are XXXXX. There are no additives or preservatives. The XXXXX product is a package containing a mixture of these XXXXX types of dried fruit.

4. XXXXX

Rulings Requested

1. How does GST/HST apply to the individual packages of dried fruit containing no additives or preservatives that are a single fruit?

2. How does GST/HST apply to the individual packages of dried fruit that are a mixture of the XXXXX types of fruit?

3. How does GST/HST apply to the boxes containing XXXXX and XXXXX packages of dried fruit?

Rulings Given

Based on the facts set out above, we rule that:

1. Supplies of the individual packages of dried fruits containing no additives or preservatives that are a single fruit are zero-rated under section 1 of Part III of Schedule VI.

2. Supplies of the individual packages of dried fruit that are a mixture of the XXXXX types of fruit are taxable at the rate of 5% GST or 13% HST (as applicable) pursuant to section 165.

3. Supplies of boxes containing XXXXX and XXXXX packages of dried fruit are zero-rated under section 1 of Part III of Schedule VI.

These rulings are subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by these rulings 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 tax calculated at the rate of 5% on the value of the consideration for the supply (or 13% in the participating provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador) unless the supply is zero-rated. Zero-rated supplies are included in Schedule VI. The tax rate in respect of a zero-rated supply is 0%.

Under Part III of Schedule VI, certain supplies of basic groceries are zero-rated. Section 1 of Part III of Schedule VI, zero-rates supplies of food or beverages for human consumption, including sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, other than supplies included in paragraphs (a) to (r) of that section.

In particular, paragraph 1(i) of Part III of Schedule VI excludes from zero-rating the following:

"Snack mixtures that contain cereal, nuts, seeds, dried fruit or any other edible product, but not including any mixture that is sold primarily as a breakfast cereal."

A "snack mixture" is described in GST/HST Info Sheet GI-021, Snack Foods, as a mixture of two or more of the ingredients noted in paragraph 1(i) of Part III of Schedule VI. Further, two or more varieties of the same kind of ingredient, such as two or more varieties of dried fruit are considered to be snack mixtures.

Generally, where a package of multiples of similar foods or beverages contains more than 50% otherwise zero-rated goods, the supply of the package will be zero-rated. Where a package of multiples of similar foods or beverages contains 50% or less otherwise zero-rated goods, the supply of the package will be taxable at 5% GST or 13% HST, as applicable.

Therefore, supplies of the individual packages of a single fruit are not considered a snack mixture and are not excluded from zero-rating under paragraph 1(i) of Part III of Schedule VI. Since there are no other exclusions that apply, supplies of the individual packages of a single fruit are zero-rated under section 1 of Part III of Schedule VI.

Supplies of the individual packages of dried fruit that are a mixture of XXXXX types of fruits are considered a snack mixture. As such, supplies of the individual packages of mixed dried fruit are excluded from zero-rating under paragraph 1(i) of Part III of Schedule VI and are taxable at 5% GST or 13% HST, as applicable.

Supplies of the boxes containing XXXXX and XXXXX packages of dried fruit contain XXXXX% mixed fruit packages that are otherwise taxable and XXXXX% single fruit packages that are otherwise zero-rated. Since the boxes of XXXXX and XXXXX packages of dried fruit contain greater than 50% otherwise zero-rated dried fruit, the supply of the boxes will be zero-rated under section 1 of Part III of Schedule VI.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at XXXXX. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

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

2008/02/08 — RITS 98769 — ITC's for Tax on Imported Goods