23 December 2002 GST/HST Ruling 43062 - Application of the GST to Powder

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 powder ("the product").

Statement of Facts

Our understanding of the facts is as follows:

1. Your organization is granted the power to act on behalf of XXXXX [Company A], XXXXX. and you require a ruling in respect of the product.

2. Company A imports the product XXXXX[.]

3. The product is a XXXXX protein powder intended to supplement XXXXX[.]

4. XXXXX XXXXX of the product when mixed XXXXX[.]

5. The principal ingredients of the product are whey protein concentrate, XXXXX artificial XXXXX flavor and sweetener (XXXXX[).]

Ruling Requested

You requested the tax status of the product pursuant to the Excise Tax Act (ETA).

Previous Ruling

In our letter dated XXXXX we ruled that supplies of the product were taxable at 7% or 15%, as applicable, pursuant to section 1(d), Part III, Schedule VI to the ETA.

Revised Ruling

Having reviewed the facts of this case, we confirm that supplies of the product are taxable at 7% or 15%, as applicable. However, it should be noted that these products are taxable pursuant to section 165 of the ETA and not section 1(d) of Part III of Schedule VI to the ETA as previously indicated.

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 ETA, 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. Additionally, a product that is marketed for its beneficial effects, and that is added to a food or beverage simply as a means of consuming it, would not be considered as an ingredient to a food or beverage simply because it is ingested in this manner.

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 labelling, packaging and marketing to determine whether a product would be considered a "food", "beverage", or "ingredient".

Directions for use for this product are to mix XXXXX XXXXX[.] These types of directions or restrictions relating to the amount to be consumed generally indicate that the product is being consumed for a purpose other than as a food, beverage or ingredient.

The main ingredients of the product are whey protein concentrate and XXXXX intended to supplement XXXXX. Products that are labeled or marketed as products to be consumed to facilitate the intake of certain ingredients (nutritive or otherwise) or which 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