7 December 2000 GST/HST Ruling 30289 - Application of GST/HST on the Importation of Powdered Cellulose

Dear Madam,

This is in reference to your facsimile transmission of February 21, 2000 to the XXXXX. You requested a ruling on behalf of your client, XXXXX, regarding the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) on the importation of XXXXX powdered cellulose. Your request has been transferred to our office for reply.

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX is importing powdered cellulose from XXXXX[.]

2. XXXXX has engaged XXXXX as its customs broker for the importation of the powdered cellulose.

3. The powdered cellulose is sold under the registered trademark XXXXX and is used as a bulking agent, a water structuring agent, and an anticaking agent in the production of food, pharmaceutical tablets, and pet food.

4. XXXXX powdered cellulose is available in several grades. XXXXX is used in the manufacturing of food, such as baked goods, batters and mixes, diet drinks and mixes, sauces, grated and shredded cheese, frozen novelties and fruit yogurt.

5. XXXXX is importing XXXXX for use as an anticaking agent in shredded cheese.

6. Cellulose is a food additive under the Food and Drugs Act. It is a permitted additive when used as an anticaking agent in grated or shredded cheese, as listed in Table I of Division 16 of the Food and Drugs Regulations to the Food and Drugs Act.

7. XXXXX powdered cellulose is classified under Customs tariff classification number 4704.21.00.00 (Chemical wood pulp) when imported.

Ruling Requested

What is the GST/HST status of XXXXX powdered cellulose on importation?

Ruling Given

Based on the facts set out above, we rule that XXXXX powdered cellulose is zero-rated under section 1 of Part III of Schedule VI to the Excise Tax Act (ETA). As such, XXXXX powdered cellulose is a non-taxable importation under Schedule VII to the ETA.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Division III of the ETA outlines the application of GST/HST to goods imported into Canada. Pursuant to section 212 of Division III, "every person who is liable under the Customs Act to pay duty on imported goods, or who would be so liable if the goods were subject to duty, shall pay to Her Majesty in right of Canada tax on the goods calculated at the rate of 7% on the value of the goods." Section 213 of Division III outlines an exception to this provision: "No tax under this Division is payable in respect of goods included in Schedule VII." Under section 6 of Schedule VII, "Goods the supply of which is included in any of Part I to IV and VIII of Schedule VI" are non-taxable for Division III purposes.

Schedule VI to the ETA outlines supplies that are zero-rated for GST/HST purposes. Supplies of basic groceries are zero-rated under Part III of Schedule VI. Pursuant to section 1 of Part III, supplies 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) are zero-rated for GST/HST purposes, other than supplies excluded under paragraphs (a) through (r) of that section.

XXXXX powdered cellulose is a food additive to be mixed with or used in the preparation of food or beverages for human consumption, and is not listed as an exclusion in paragraphs (a) through (r) of section 1 of Part III of Schedule VI to the ETA. Therefore, the supply of XXXXX powdered cellulose is zero-rated under section 1 of Part III of Schedule VI to the ETA. If XXXXX in other grades is packaged and promoted for non-food uses only, such as for the production of pharmaceutical tablets or pet food, the supply would be taxable at 7% or 15%.

Since XXXXX is included in Part III of Schedule VI, the importation of XXXXX powdered cellulose is non-taxable under Schedule VII to the ETA.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8253.

Yours truly,

Jacqueline Russell
Technical Officer
Goods Unit
General Operations & Border Issues Division
Excise and GST/HST Rulings Directorate

Donna Harding

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