24 August 2000 GST/HST Ruling 31887 - Tax Status of and

Dear Mr. XXXXX

Thank you for your letter of June 28, 2000 (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the above-noted products.

Statement of Facts

Our understanding of the facts is as follows:

-    XXXXX is a XXXXX cereal and milk bar. It comes in a regular and a cocoa flavour;

-    It is advertised as a "XXXXX ";

-    The ingredients of the regular flavour are: XXXXX cereal, milk ingredients, sugar, hydrogenated palm kernel oil, dextrose, calcium carbonate, soya lecithin and artificial flavour;

-    The ingredients of the cocoa flavour are: XXXXX cereal, milk ingredients, sugar, hydrogenated palm kernel oil, dextrose, cocoa, calcium carbonate, soya lecithin and artificial flavour;

-    The bar is individually wrapped and weighs 23 grams;

-    The bars are sold in a retail format of 8 bars per carton and a jumbo format of 24 bars per carton, and a foodservice display box format of 24 bars per carton[;]

-    XXXXX[;]

-    The product comes in three flavours: XXXXX, XXXXX XXXXX;

-    It is sold in cartons of 4 or 12;

-    The main ingredients are vegetables, water, and brown rice;

-    The product is similar in appearance to a hamburger patty.

Ruling Requested

Is the supply of these new products subject to GST/HST?

Ruling Given

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

1. The supply of both flavours of XXXXX, in the 8 and 24 bar retail format, is zero-rated pursuant to section 1 of Part III of Schedule VI to the Excise Tax Act (ETA).

2. The supply of both flavours of XXXXX, in the 24 bar foodservice display box format, is taxable at 7% GST or 15% HST (where applicable) as they are excluded from zero-rating pursuant to paragraph 1(m) of Part III of Schedule VI to the ETA.

3. The supply of XXXXX in all flavours is zero-rated pursuant to section 1 of Part III of Schedule VI 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 ETA, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Generally, every recipient of a taxable supply made in Canada shall pay to Her Majesty in right of Canada tax in respect of the supply calculated at the GST rate of 7% or the HST rate of 15% (where applicable) on the value of the consideration for the supply pursuant to subsections 165(1) and (2) of the ETA. Where, however, a supply is a zero-rated supply, the tax rate in respect of that supply is 0%.

Section 1 of Part III of Schedule VI to the ETA states that 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, other than supplies included in paragraphs (a) to (r ).

Paragraph 1(m) of Part III of Schedule VI excludes from zero-rating supplies of:

cakes, muffins, pies, pastries, tarts, cookies, doughnuts, brownies, croissants with sweetened filling or coating, or similar products where

(i) they are prepackaged for sale to consumers in quantities of less than six items each of which is a single serving, or

(ii) they are not prepackaged for sale to consumers and are sold as single servings in quantities of less than six, but not including bread products, such as bagels, English muffins, croissants or bread rolls, without sweetened filling or coating;

As the supply of XXXXX in retail format of 8 or 24 single servings per carton is not within the scope of subparagraph 1(m)(i) of Part III of Schedule VI to the ETA, the supply is zero-rated.

Display boxes are not considered to be "consumer packaging" for the purposes of Paragraph 1(m). Display boxes are designed to be opened and set up to create an eye catching display from which the consumer may purchase any number of individually packaged single servings. Therefore, for the purposes of Paragraph 1(m) of Part III of Schedule VI to the ETA, the supply of the display box containing 24 individually wrapped single serving XXXXX (in all flavours) is taxable at the rate of 7% GST or 15% HST (where applicable).

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9585.

Yours truly,

Roger Tessier CA
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate