28 March 2001 GST/HST Ruling 35144 - GST/HST on Bars

Dear XXXXX:

This is further to our letter of XXXXX, regarding Application Ruling No. XXXXX, (dated XXXXX). In our XXXXX, letter, we indicated that we were in the process of reviewing the tax status of XXXXX bars (i.e. nutritional supplements), that XXXXX was suspended and that GST/HST did not have to be charged on the supply of nutritional supplements.

At this time, we confirm that nutritional supplements, as defined in section B.01.001 of the Regulations to the Food and Drug Act ("FDA"), are considered a basic grocery and are zero-rated pursuant to section 1 of Part III of Schedule VI to the Excise Tax Act ("the Act"). Our current ruling is set out below.

Please accept our apologies for the delay in replying to your letter.

Statement of Facts

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

1. XXXXX, a division of XXXXX, sells XXXXX bars ("bars").

2. The bars are available in two flavours, XXXXX and chocolate.

3. 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".

4. 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.

5. The bars are sold as a nutritional food intended to XXXXX[.]

6. Each bar weighs 65 grams.

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

8. The bars are sold in the pharmacy section of grocery stores. They are sold individually from merchandising cartons containing 16 bars each. The recommended retail price is $1.49 to $1.69 each.

Ruling Requested

Supplies of both types of bars are zero-rated for GST/HST purposes under section 1 of Part III of Schedule VI to the Act.

Ruling Given

Based on the facts set out above, we rule that both types of bars are zero-rated 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 or 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 again reviewed all information submitted on the bars. Further, we have considered representations on the marketing of the bars, in accordance with CCRA administrative policy.

In particular, we note that the bars qualify and are labeled as nutritional supplements pursuant to the FDA and it's Regulations and that marketing of the bar emphasizes this. It is the CCRA's position that products which qualify and are labeled as nutritional supplements pursuant to the FDA and its Regulations are 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 Division
Excise and GST/HST Rulings Directorate
References