9 May 2002 GST/HST Ruling 35691 - Application of GST/HST to Bar

Dear XXXXX:

Thank you for your letter of April 11, 2001, concerning Application Ruling No. XXXXX, dated XXXXX. You have asked us to reconsider our ruling that the XXXXX flavour of the XXXXX bar ("bar") is taxable at the rate of 7% Goods and Services Tax (GST) or 15% Harmonized Sales Tax (HST), as applicable. This decision was based on the fact the bar did not meet the labelling requirements for meal replacement products under the Food and Drugs Act ("F&DA") and its Regulations.

Statement of Facts

1. The bar is a weight management product imported into Canada. Information provided on the bar indicates that it is formulated with a precise ratio of protein, carbohydrate and fat that triggers the burning of stored body fat for a number of hours after eating. The bar is advertised as either a meal or a snack.

2. The bar qualifies as a nutritional supplement under the Food & Drugs Act (F&DA) and its Regulations. Section B.01.001 of the Regulations to the F&DA 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 a nutritional supplement, the bar must meet the nutritional profile, compositional, and labelling requirements of the Regulations to the F&DA. It 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.

Ruling Requested

Is the bar zero-rated 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 the bar is zero-rated pursuant to section 1 of Part III of Schedule VI to the ETA. Please note that this ruling supersedes Application Ruling No. XXXXX, dated XXXXX.

Explanation

Taxable supplies of goods and service 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 Excise Tax Act ("ETA").

Section 1 of Part III of Schedule VI to the ETA zero-rates 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.

It is the position of the Canada Customs and Revenue Agency ("CCRA") that products which qualify and are labelled as nutritional supplements pursuant to the F&DA and its Regulations are considered to be basic groceries pursuant to section 1 of Part III of Schedule VI to the ETA and, therefore, are zero-rated.

We note that the label submitted with your previous request indicated that the bar did not meet labelling requirements for meal replacements or nutritional supplement products under the F&DA and its Regulations. However, we have examined the labels of the bar which are currently sold to consumers and consulted with the Consumer Information Office of the manufacturer of the bar and have determined that all flavours of the bar sold in Canada qualify as a nutritional supplement, not a meal replacement. Therefore, the bar is zero-rated pursuant to section 1 of Part III of Schedule VI to the ETA.

As stated in the facts, the bar is imported into Canada. Division III of the ETA provides that GST/HST is payable on dutiable goods (under the Customs Act) imported into Canada. Section 6 of Schedule VII to the Act provides, in part, that goods included in Part III of Schedule VI (i.e. zero-rated basic groceries) are non-taxable importations. Since the bar is a zero-rated basic grocery under Part III of Schedule VI, it is not taxable upon importation into Canada.

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 transaction(s) for which you have requested a ruling.

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