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Subject:
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Usual Coverings and Containers
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This is further to your submission of April 11, 1996, to Ken Syer of this office regarding the application of the Goods and Services Tax (GST) to the supply of zero-rated basic groceries and whether certain containers are usual coverings and containers for the purposes of section 137 of the Excise Tax Act (ETA).
XXXXX supply XXXXX. The XXXXX is decorated with an image of an XXXXX surrounded by XXXXX. The back of the XXXXX is covered with cardboard explaining the significance of the XXXXX as a work of art.
XXXXX
Section 137 of the ETA reads as follows:
"For the purposes of this Part, where tangible personal property of a particular class is supplied in a covering or container that is usual for that class or property, the covering or container shall be deemed to form part of the property so supplied.
For purposes of section 137 of the ETA, the XXXXX is not considered to be a usual covering or container. Further, the supply of the XXXXX and XXXXX is considered a single supply for purposes of the ETA. This single supply is not zero-rated under Schedule VI to the ETA and therefore is taxable at 7%.
XXXXX have requested that, in light of our position regarding the XXXXX the Department examine the application of GST to the gift food industry in general.
For the present, the Department will maintain it's interpretation of section 137. All coverings or containers for zero-rated basic groceries which are generally recognized as containers in their own right are considered to be usual coverings or containers under section 137. This includes decorative metal tins and the decorative wooden box used by XXXXX as an alternative form of packaging for XXXXX[.]
We accept that decorative containers are used by manufacturers as a tool to entice consumers to purchase their products. It is a common practice. However, we do not accept goods which are not containers in their own right as usual coverings or containers under section 137. We have confirmed this position with the Department of Finance.
If you would like to discuss this matter further, please contact Ken Syer, A/Senior Policy Officer, at (613) 952-9590.
Enikö Vermes
Manager
Health Care,
Goods and Services
GST Rulings and Interpretations
Telephone No.: (613)954-8224
Fax No.: (613) 954-3602
File No.: 11640-3
Sch. VI/V/7
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