17 December 2002 GST/HST Ruling 43024 - Tax Status of Meal Replacement Bars and Drinks

Dear XXXXX:

This letter is further to our letter dated XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX Bars and Drinks. The information provided in this letter pertains to XXXXX Drinks.

Statement of Facts

Our understanding of the facts is as follows:

XXXXX Drinks (the Product)

•   The Product is formulated with a XXXXX

•   The Product is advertised as either a meal or a snack.

•   The Product is available in XXXXX flavours.

•   Ingredients in the XXXXX flavour of the Product include water, fructose, milk protein and cocoa. Ingredients in the XXXXX flavour of the Product include water, fructose and milk protein.

•   The Product is packaged in XXXXX[.]

Ruling Requested

You requested a ruling as to whether the above product was zero-rated as a meal replacement, pursuant to section 1 of Part III of Schedule VI to the Excise Tax Act (ETA) and the administrative policy of the Canada Customs and Revenue Agency (CCRA).

Previous Ruling Given

On XXXXX the CCRA ruled that the Product was zero-rated as a basic grocery pursuant to section 1 of Part III of Schedule VI to the ETA.

Having reviewed the facts of this case, we are providing you with the following revised ruling.

Revised Ruling Given

Based on the facts set out above, we rule that the Product is taxable at 7% GST or 15% HST, as applicable, pursuant to section 165 of the ETA.

This ruling supersedes our previous ruling dated XXXXX.

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 transactions for which you requested a ruling.

Revised Explanation

The terms "food" and "beverage" are not defined in the ETA. However, the CCRA position is that these terms are to be construed according to their ordinary meaning. That is, a food or a beverage is a good that an average consumer would recognize and purchase as such in the ordinary course of buying basic groceries.

Pursuant to GST/HST Policy Statement P-240, Application of GST/HST to Products Commonly described as "Dietary Supplements", if a product identifies itself as a 'supplement', 'dietary supplement', 'food supplement' or other similar type of supplement, this is an indication that the product is consumed for the purpose of enhancing or improving a person's state of health and not as a food, beverage or ingredient.

Among other factors, the CCRA will consider labeling, packaging and marketing to determine whether a product would be considered a "food", "beverage", or "ingredient".

The Product is marketed XXXXX. This would indicate that the Product is not a food or beverage.

The main ingredients of the Product are water, fructose and milk protein. The Product is formulated XXXXX. Products that place an emphasis on claims relating to the benefits of the product such as therapeutic or preventative effects, or claim to enhance performance or physique are not considered to be a food or beverage.

As a result of the above, the CCRA considers that the Product is not a food, beverage or ingredient and is therefore taxable at 7% GST or 15% HST, as applicable, pursuant to section 165 of the ETA.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-5124

Yours truly,

Nicole Thomas
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate