30 March 2000 GST/HST Interpretation 7972/HQR0001578 - PROPOSED LAW/REGULATION Revision to Our Letter to You Dated December 20, 1990

Dear Sirs:

By letter dated December 20, 1990, to the attention of XXXXX XXXXX we advised you of the Goods and Services Tax (GST) status of various animal feeds and animal feed ingredients, pursuant to the Excise Tax Act (the "ETA"). A copy of that letter is attached.

Please note that on November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency (the "CCRA").

Previous Interpretation

In our December 20, 1990, letter, we stated that section 10 of Part IV of Schedule VI to the ETA and the Agriculture and Fishing Property (GST) Regulations to the ETA would not apply to zero-rate the following two feed ingredients:

XXXXX[.]

Interpretation Given

We have reviewed our previous interpretation and wish to provide the following additional information. Subsection 1(3) of the schedule to the Agriculture and Fishing Property (GST) Regulations to the ETA (the "Agriculture Schedule"), listing prescribed property pursuant to section 10 of Part IV of Schedule VI to the ETA, may apply to zero-rate each of the two feed ingredients "XXXXX XXXXX where each of these products meets all of the following requirements ^[xii]ii1:

1. it is either a by-product of the food processing industry, or a plant or animal product;

2. it is ordinarily used as feed, or as ingredients in feed, for farm livestock, or poultry ^[xiii]iii2;

1. the farm livestock or poultry are ordinarily raised or kept to produce, or to be used as, food for human consumption or to produce wool; and

2. it (the feed ingredient) is sold in bulk quantities XXXXX[.] It is our understanding that both XXXXX are generally considered to be plant products, and thereby comply with the first requirement. We also understand that they are considered as single feed ingredients pursuant to the Feeds Regulations, 1983, to the Feeds Act and thereby meet the second requirement.

With respect to the third requirement, in determining whether the farm livestock or poultry are ordinarily raised or kept to produce, or to be used as, food for human consumption or to produce wool, all "uses" of the livestock or poultry are considered (i.e. food production, wool production, research, pets, zoos, game farms, etc.). Where the livestock or poultry are found to have significant other uses, the supply of feed for this livestock or poultry is subject to GST/HST in all situations including those situations where the feed is used for livestock or poultry which are used to produce, or to be used as, food for human consumption or to produce wool.

Examples of livestock and poultry that the CCRA considers to be farm livestock or poultry that are ordinarily raised or kept to produce, or to be used as, food for human consumption or to produce wool can be found in paragraph 5 on page 2 of the enclosed GST/HST Memoranda Series 4.4. Similarly, examples of farm livestock or poultry that the CCRA considers not to be ordinarily raised or kept to produce, or to be used as, food for human consumption or to produce wool can be found in paragraph 8 on page 3.

The last requirement concerning minimum supply quantities depends on the facts of each individual supply. Once a product complies with the first, second, and third requirements, supplies of this product in all circumstances are zero-rated supplies when the product is supplied in the required minimum quantities. For example, cattle are considered to be ordinarily raised or kept to produce or to be used as food for human consumption. Where a plant product is ordinarily used as feed for cattle, the supply of this plant product, when supplied in the required minimum quantities, is zero-rated even if the purchaser intends to use the product as a feed for horses.

As noted in our December 1990 letter, goods that do not qualify for zero-rating under Subsection 1(3) of the Agriculture Schedule could potentially be zero-rated under Part III of Schedule VI to the ETA as ingredients for food or beverages for human consumption. Goods which qualify for zero-rating under Part III of Schedule VI to the ETA would continue to be zero-rated when supplied for feed.

A supply which is a zero-rated supply is taxable at the rate of zero percent. Taxable supplies made in Canada which are not zero-rated are taxable at the GST rate of 7%, or the HST rate of 15%, as applicable. ^[xiv]iv3 On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%. If you supply by-products of the food processing industry and plant or animal products that are delivered or made available in a participating province, to the extent that the supplies are taxable supplies (which are not zero-rated), tax must be collected at the 15% harmonized rate.

The foregoing comments represent our general views with respect to the subject matter of your letters. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the CCRA with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-2560.

Yours truly,

Richard Aronoff
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate