8 May 2002 GST/HST Ruling 38029 - Tax Status of Bars

Dear XXXXX

This is in reply to your letter of November 9, 2001, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to various flavours of XXXXX bars (bar). Your letter was originally sent to our XXXXX Tax Services office, but was subsequently forwarded to this office for reply. Our comments are set out below.

Statement of Facts

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

1. XXXXX (previously known as XXXXX) imports various flavours of the bar into Canada.

2. The bar is advertised as a nutritious energy bar, low in fat and formulated with natural ingredients. Product literature indicates that each bar has XXXXX vitamins and minerals, XXXXX grams of proprietary fiber blend and XXXXX grams of soy protein for enhanced muscle recovery. They are sold individually in XXXXX gram bars.

3. The manufacturer of the bar has recently changed its formulation so that all flavours of the bar qualify and are labelled as nutritional supplements, pursuant to the Food & Drugs Act (F&DA) and its Regulations. Section B.01.001 of the Regulations to the F&DA define a nutritional supplement to mean a "food sold or represented as a supplement to a diet that may be inadequate in energy and essential nutrients". Nutritional supplements must contain 21 specified micronutrients (i.e. vitamins and minerals) within a range relative to their energy content.

Ruling Requested

Is the bar zero-rated for GST/HST purposes 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 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 ETA, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

Taxable supplies of goods and services made in Canada are generally subject to 7% GST (or 15% HST when 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 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 paragraph 1(a) through 1(r) applies.

We have reviewed all information submitted on the bar. In particular, we note that the bar has recently been reformatted and now qualifies and is labelled as a nutritional supplement pursuant to the Regulations to the F&DA. It is the Canada Customs and Revenue Agency's position that products which qualify and are labelled as nutritional supplements pursuant to the Regulations to the F&DA are considered to be basic groceries pursuant to section 1 of Part III of Schedule VI to the ETA and, therefore, are zero-rated.

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 ETA 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 non-taxable on importation into Canada.

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