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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5XXXXX
XXXXX
XXXXXXXXXX
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Case Number: 38400August 30, 2002
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Subject:
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GST/HST APPLICATION RULING
Supply of Dietary Supplements
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Dear XXXXX:
Thank you for your letter of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the XXXXX. products described below.
Statement of Facts
Our understanding of the facts as submitted, XXXXX XXXXX and our telephone conversation of XXXXX is as follows:
XXXXX [Product A]
• Product A is a powder containing XXXXX
• Product A is available in five flavours: Chocolate, Vanilla, Strawberry, Banana, and Natural.
• XXXXX
• XXXXX:
XXXXX [Product B]
• Product B is an anabolic/anti-catabolic (bodybuilding) powder.
• Product B consists of XXXXX
• Product B is available in three flavours: Chocolate, Vanilla and Strawberry
• XXXXX.
• XXXXX.
XXXXX [Product C]
• Product C is a capsule containing XXXXX
• XXXXX
• XXXXX [Product D]
• Product D is powdered XXXXX.
• XXXXX
• XXXXX.
• XXXXX XXXXX XXXXX [Product E]
• Product E is a powder consisting of XXXXX
• XXXXX XXXXX.
• XXXXX XXXXX
• XXXXX XXXXX [Product F]
• Product F is a capsule containing various natural herbs.
• XXXXX XXXXX
• XXXXX
• XXXXX [Product G]
• Product G is a capsule containing XXXXX
• XXXXX XXXXX.
• XXXXX.
XXXXX [Product H]
• Product H is a powder consisting of XXXXX XXXXX
• Product H is available in three flavours: World Class Chocolate, Vanilla, and Strawberry.
• XXXXX XXXXX
• XXXXX XXXXX [Product I]
• Product I is a powder consisting of XXXXX.
• Product I is available in three flavours: Grape, Fruit Punch and Orange.
• XXXXX XXXXX
• XXXXX XXXXX
• XXXXX XXXXX
XXXXX [Product J]
• Product J is a capsule containing XXXXX.
• XXXXX XXXXX
• XXXXX [Product K]
• Product K is a capsule containing XXXXX
• XXXXX XXXXX
• XXXXX
• XXXXX XXXXX [Product L]
• Product L is a powder consisting of XXXXX.
• XXXXX XXXXX
• XXXXX [Product M]
• Product M is a capsule containing XXXXX.
• XXXXX.
• XXXXX
• XXXXX XXXXX [Product N]
• After speaking to you on XXXXX, you confirmed that this product has been discontinued.
XXXXX [Product O]
• Product O is a powder consisting of XXXXX
• Product O is available in Chocolate and Vanilla flavours.
• XXXXX XXXXX [Product P]
• Product P is a powder consisting of XXXXX.
• Product P is available in Chocolate and Vanilla flavours.
• XXXXX XXXXX
• XXXXX XXXXX
XXXXX [Product Q]
• Product Q is a powder consisting of XXXXX.
• XXXXX XXXXX
• XXXXX XXXXX.
XXXXX [Product R]
• Product R is a capsule containing XXXXX.
• TheXXXXX recommends XXXXX
• XXXXX XXXXX.
XXXXX [Product S]
• Product S is a powder consisting of XXXXX, Essential Fatty Acids, Antioxidants, Vitamins and Minerals.
• Product S is available in XXXXX flavours.
• XXXXX XXXXX.
XXXXX [Product T]
• Product T is a capsule containing XXXXX XXXXX.
• XXXXX XXXXX.
• XXXXX XXXXX
Ruling Requested
Are the listed products zero-rated supplies pursuant to section 1 of Part III of Schedule VI to the Excise Tax Act (ETA)?
Ruling Given
Based on the facts set out above, we rule that all of the listed products are taxable at the GST rate of 7% or the HST rate of 15%, in participating provinces, pursuant to section 165 of the ETA.
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 for which you requested a ruling.
Explanation
Generally, every recipient of a taxable supply made in Canada shall pay to Her Majesty in right of Canada tax in respect of the supply calculated at the GST rate of 7% (or HST rate of 15%, as applicable) on the value of the consideration for the supply. Where, however, a supply is a zero-rated supply, the tax rate in respect of that supply is 0%.
A supply of food or beverages for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of such food or beverages) is zero-rated (i.e., taxed at a rate of 0%) pursuant to section 1 of Part III of Schedule VI to the ETA. Certain food or beverages (e.g., carbonated beverages) are taxable at 7% (or 15% if made in a province participating in the Harmonized Sales Tax) because they are excluded from zero-rating by paragraphs 1(a) to 1(r) of Part III.
The terms "food" and "beverage" are not defined in the ETA. The CCRA considers that a product is a food or a beverage if an average consumer would recognize and purchase the product as a food or beverage in the ordinary course of buying basic groceries. Put differently, products would be considered to be a food or a beverage if they would be consumed by an average consumer when food or beverages are typically consumed, such as at mealtimes or for a snack. Products that meet special dietary needs of certain segments of the population such as those with restricted or special purpose diets, high performance athletes and dieters may not necessarily be viewed by the average consumer as food or beverages. In addition, individual preferences for, or dislikes of, certain products would not alter general perceptions of food or beverages.
Consumers usually consume food for enjoyment or to allay hunger, while beverages are usually consumed for enjoyment or to quench thirst. That is, food and beverages are consumed to sustain or maintain life, to allay hunger or thirst, or for enjoyment, rather than for therapeutic or preventative effects (e.g., to correct actual or perceived health problems) or to achieve specific beneficial effects related to performance or physique. Therefore, products that are labelled, packaged 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, for example, therapeutic or preventive effects, or enhancing performance or physique, are not considered to be products that an average consumer would ordinarily purchase in the course of buying food or beverages.
Furthermore, the CCRA considers a product to be an ingredient if an average consumer would recognize the product as an ingredient into food or a beverage, and it is the view of the CCRA that an average consumer would consider a product to be an ingredient if the product added to flavour, texture or appearance of the final product; that is, if it was integral to the final product. As with food and beverages, it is also recognized that products that are consumed for their therapeutic, preventative, or performance or physique enhancing properties would not be recognized by an average consumer as ingredients. Moreover, in order to be regarded as an ingredient to a food or beverage, the final product, in and of itself, would be considered to be a food or beverage by the average consumer.
Finally, 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 by an average consumer as an ingredient simply because it is ingested in this manner.
If a product's tax status is in doubt, the CCRA will consider the manner in which the product is labelled, packaged, and marketed to determine its tax status. There are a number of factors that the CCRA considers in determining whether a product would be considered by an average consumer to be a food, beverage or ingredient. Some of the factors that apply in this case are as follows.
• Products that are available in pill, tablet or capsule formats would not be considered by an average consumer to be a food. Products C, F, G, J, K, M, R and T are capsules.
• Moreover, products that are labelled 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, for example, therapeutic or preventative effects, or enhancing performance or physique, are not considered to be products that an average consumer would ordinarily purchase in the course of buying food or beverages. Rather, these products are represented as being for another purpose and so are not considered to be basic groceries. All of the products described place an emphasis on the therapeutic or preventative benefits of the product.
• Furthermore, Product K and Product M have an advisory as to who should not consume the product. Products with warnings related to consumption are generally not considered to be a food.
For greater detail, please refer to the enclosed Policy Statement P-240, Application of GST/HST to Products Commonly described as "Dietary Supplements".
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9218.
Yours truly,
Kevin W. Smith
Senior Rulings Officer
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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P-240 Application of GST/HST to Products Commonly Described as "Dietary Supplements" |
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