28 March 2001 GST/HST Ruling 2952 - Application of GST to Snack Bars

Dear XXXXX:

We are writing in response to your request of July 13, 1999, regarding the subject noted above. You asked about the application of the Goods and Services Tax ("GST")/Harmonized Sales Tax ("HST") to XXXXX snack bars ("bars"). Our comments are set out below.

Statement of Facts

Our understanding of the facts of this case is as follows:

1. XXXXX sells XXXXX snack bars in two formats. These are the chocolate XXXXX pack, (containing four bars of chocolate XXXXX) and a variety pack (containing two bars of chocolate XXXXX, one of strawberry XXXXX and one of XXXXX). Each pack of four bars weighs 200 grams.

2. The bars qualify as nutritional supplements, but not meal replacements, under the Regulations to the FDA. Section B.01.001 of the Regulations to the FDA defines "nutritional supplement" to mean "a food sold or represented as a supplement to a diet that may be inadequate in energy and essential nutrients".

3. As nutritional supplements, the bars must meet the nutritional profile, compositional and labeling requirements of the Regulations to the FDA. They must contain 21 specified micronutrients (i.e. vitamins and minerals) within a range relative to their energy content, which is also regulated. Also, among other things, there are requirements for protein and fat content.

4. The bars are labeled as "nutritional supplements".

Ruling Requested

Supplies of the bars are zero-rated as basic groceries for GST/HST purposes under section 1 of Part III of Schedule VI of the Act.

Ruling Given

Based on the facts set out above, we rule that the bars are zero-rated as basic groceries under section 1 of Part III of Schedule VI to the Act.

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

Taxable supplies of goods and services made in Canada are generally subject to tax at 7% (or 15% where the supplies are made in one of the provinces participating in the HST). However, "zero-rated" supplies of goods and services are subject to tax at 0%. A zero-rated supply is any supply included in Schedule VI to the Act.

Section 1 of Part III of Schedule VI to the Act zero-rates supplies of food and beverages for human consumption ("basic groceries") and many ingredients mixed with or used in the preparation of such food or beverages, unless one of the exceptions in paragraphs 1(a) through 1(r) applies. Also, the Canada Customs and Revenue Agency's ("CCRA") administrative policy on basic groceries is set out in Chapter 4.3 of the GST Memoranda Series and a relevant aspect of the policy is as follows:

"If a product's tax status is in doubt, the Department will consider the manner in which the product is displayed, labeled, packaged, invoiced and advertised to determine its tax status."

We have reviewed all information submitted on the bars. Further, we have considered how the bars are marketed, in accordance with CCRA administrative policy. In particular, we note that the bars qualify and are labeled as nutritional supplements pursuant to the Regulations to the FDA. It is the CCRA's position that products which qualify and are labeled as nutritional supplements pursuant to the Regulations to the FDA are considered basic groceries pursuant to section 1 of Part III of Schedule VI to the Act, and, therefore, are zero-rated.

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,

Pauline Greenblatt
Goods Unit
General Operations and Border Issues Unit Division
Excise and GST/HST Rulings Directorate