File: 11850-1
C.N.: 2787
|
Subject:
|
Application of the GST to Dietary Supplements
|
This is in response to your telephone conversation of March 1, 1996, in which you requested clarification regarding the GST status of the supply of dietary supplements. The following will explain the application of the GST to dietary supplements in all formats.
The supply of "basic grocery" items is zero-rated for GST purposes under Part III of Schedule VI to the Excise Tax Act (ETA). The majority of the list of GST zero-rated food items mirrors the list of food items which were FST exempt. Some goods are excluded from being considered basic groceries, among those goods are some dietary supplements.
Pills, Tablets, Capsules and Similar Formats
Certain classes of dietary supplements are not considered to be basic groceries. These include goods in pill, tablet, capsule form such as vitamin pills, fibre pills, ginseng tablets and wheat germ oil capsules. All domestic supplies and importations of goods in these formats are GST taxable. It does not matter whether these goods carry a Drug Identification Number or otherwise. All supplies in this format are subject to the GST. This is the only policy which is unique to dietary supplements and has been supported by recent Federal Court decisions.
The remaining types of dietary supplements, which follow in this letter, are subject to the normal GST rules for food for human consumption.
Powdered Dietary Supplements
Part III of Schedule VI to the ETA includes the following as zero-rated basic groceries: "sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of...food or beverages". This blanket zero-rated status for all ingredients for food or beverages for human consumption led to the Department zero-rating the supply of virtually all powdered dietary supplements.
The only powdered dietary supplements which may be taxable are those which fall under the following exclusion from the zero-rated status for basic groceries, paragraph 1(d) of Part III of Schedule VI:
"non-carbonated fruit juice beverages or fruit flavoured beverages, other than milk-based beverages, that contain less than 25% by volume of
(i) a natural fruit juice or combination of natural fruit juices, or
(ii) a natural fruit juice or combination of natural fruit juices that have been reconstituted into the original state,
or goods that, when added to water, produce a beverage included in this paragraph;"
The supply in Canada or importation into Canada of powders which, when added to water, make a fruit juice or fruit flavoured beverage, are not zero-rated. They are subject to the GST at 7%. To determine whether a powdered dietary supplement is in this taxable class of goods, one can read the label for identifiable fruits in the list of ingredients. These goods often contain fruit juices to alter unpalatable tastes.
Beverages
All carbonated beverages, including those which may be considered dietary supplements, are subject to GST at 7%. Also, all fruit flavoured beverages and fruit juice beverages with less than 25% natural fruit juices are subject to the GST at 7%.
Regarding other beverages, the following is also excluded from the zero-rated status for basic groceries under paragraph 1(n) of Part III of Schedule VI to the ETA:
"beverages (other than unflavoured milk) or pudding, including flavoured gelatine, mousse, flavoured whipped dessert product or any other products similar to pudding, except
(i) when prepared and prepackaged specially for consumption by babies,
(ii) when sold in multiples, prepackaged by the manufacturer or producer, of single servings, or
(iii) when the cans, bottles or other primary containers in which the beverages or products are sold contain a quantity exceeding a single serving;"
Under this provision, a servings of a beverage is considered to be a single serving when the serving is less than 600 ml.
Where a dietary supplement is in a bottle or primary container which contains 600 ml. or greater, it is greater than a single serving and the supply of the product in that container is GST zero-rated. Where the bottle or primary container is less than 600 ml, the supply of importation of the supplement will be zero-rated if supplied by the case lot.
The purchase of an individual single serving (or any number of loose single servings) of a dietary supplement or any other beverage is, however, taxable at 7%.
To summarize, the supply in Canada or importation into Canada of dietary supplements is treated as follows:
PILL, TABLET, CAPSULE (or similar format) Taxable at 7%
POWDERED FORMAT
Generally zero-rated except where the good, makes a taxable fruit beverage since it contains less tha 25% by volume of natural fruit juice(s) as dicussed under paragraph 1(d) discussed above.
BEVERAGES/FLUID FORM
• All carbonated beverages are taxable at 7% in all sizes.
• All fruit flavoured beverages or beverages with less than 25% fruit juice by volume are also taxable at 7% in all sizes.
• All servings 600 ml or greater, zero-rated.
• Case lots or manufacturer's packages of two or more single servings, zero-rated.
• All loose single servings, taxable.
I hope this clarifies the application of the GST to dietary supplements. If you would like to discuss this matter further, please contact Ken Syer at (613) 952-9590.
Yours truly,
Enikö Vermes
Manager
Health Care, Goods and Services
GST Rulings and Interpretations
Policy and Legislation Branch
c.c.: E. Vermes
Email this Content