15 October 1998 GST/HST Interpretation HQR0001048 - Supplies of Lunch Combinations and Snack Combinations

Dear XXXXX

This is in response to an e-mail received from XXXXX of your staff on January 27, 1998 and a follow-up letter from XXXXX of September 16, 1998 (with attachments) concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of various lunch combination products. Also, XXXXX recently forwarded to us for our review and consideration various snack combinations containing cheese or some other type of spread along with a cracker or pretzel type product. We would like to take this opportunity to recognize the submission of September 16, 1998 for its thoroughness and relevant analysis.

Interpretation Requested

You have requested an interpretation of section 1 of Part III of Schedule VI to the Excise Tax Act (the Act) in respect of supplies of lunch combinations and snack combinations sold at the grocery wholesale and retail level.

Lunch Combinations

There are two main types of lunch combinations. The basic lunch combination contains a variety of food products which are not mixed together but are packaged together as one single product. The food products are kept apart as they are sold in one plastic container which has three or four small molded compartments. The majority of the basic lunch combinations are comprised solely of food products that, if sold individually, would be zero-rated supplies. Occasionally, a basic lunch combination contains an item that, if sold separately, would not be a zero-rated supply (e.g., XXXXX chips XXXXX[)].

The other main type of lunch combination adds a juice drink and dessert to the basic lunch combination. Essentially, the complete lunch combination is the basic lunch combination as described above which is placed in a cardboard box along with a XXXXX juice drink and two cookies or a small candy bar and sold as a single product. Some varieties of complete lunch combinations include a few hard candies as a treat. The complete lunch combination takes the basic lunch combination and adds products that, if sold individually, would be supplies taxable at 7% or 15%.

Both the basic lunch combination and the complete lunch combination are designed and promoted as pre-packaged lunch kits for children.

Snack Combinations

Snack combinations are sold in many different varieties. They are packaged as one single product in a molded plastic container which has two compartments. One section holds the cracker or pretzel and the other section contains the cheese or other spread. The plastic containers are typically sold in attached lots of three or five single servings of the same variety. Representatives from a manufacturer of these types of products have stated that the majority of snack combinations sold are comprised of cheese and crackers. Retail grocery stores generally place all snack combinations together, regardless of the variety. Most snack combinations are comprised of two food products that, if sold individually, would be zero-rated supplies. However, as is the case with lunch combinations, there are varieties of snack combinations that include an item that is not a zero-rated supply if sold individually. For example, one variety contains brittle pretzels and cheese. We are not aware of any snack combination varieties that are comprised solely of items that, if sold individually, would be supplies taxable at 7% or 15%.

Interpretation Given

Based on the information provided, we provide the following interpretation of section 1 of Part III of Schedule VI to the Act.

Lunch Combinations

Serious consideration was given to XXXXX detailed analysis on this issue which was contained in her submission of September 16, 1998. The Department's position is as follows:

Section 1 of Part III of Schedule VI to the Act provides a zero-rated tax status for "(S)upplies 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 of products described in paragraphs (a) through (r) of the section.

The Department considers that a supply of a lunch combination at the grocery wholesale and retail level is a supply that does not fall within any of the excepting paragraphs (a) through (r) of section 1 of Part III of Schedule VI to the Act. Accordingly, such supplies of lunch combinations - both the basic lunch combination and the complete lunch combination - are zero-rated supplies of food and/or beverages.

Snack Combinations

Section 1 of Part III of Schedule VI to the Act provides a zero-rated tax status for "(S)upplies 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 of products described in paragraphs (a) through (r) of the section.

The Department considers that a supply of a snack combination at the grocery wholesale and retail level is a supply that does not fall within any of the excepting paragraphs (a) through (r) of section 1 of Part III of Schedule VI to the Act. Accordingly, such supplies of snack combinations are zero-rated supplies of food.

I have enclosed two recent rulings issued on these products for your information. Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 941-3971.

Yours truly,

Robert Smith
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate

Enclosure