4 March 2002 GST/HST Ruling 37536 - Application of GST/HST to Bars - Nutritional Supplements

Dear XXXXX:

Thank you for your letter of September 28, 2001, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX ("the bars"), a nutritional supplement product. As mentioned to you previously, the treatment of nutritional supplement products is currently under review. If the treatment of nutritional supplement products changes as a result of this review, this change will be effective from the date it is publicly announced.

Our comments are set out below.

Statement of Facts

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

1. The bars qualify as nutritional supplements under the Food and Drugs Act ("F&DA") and the Regulations to the F&DA. 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."

2. As nutritional supplements, the bars must meet the nutritional profile, compositional and labeling requirements of the Regulations to the F&DA. They 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.

3. The bars are labeled as "nutritional supplements".

4. The bars are a combination of grain and fruit, half enrobed in a yogurt coating. They come in two flavours, XXXXX and XXXXX. They are 55 grams each and sold in XXXXX of XXXXX bars or XXXXX of XXXXX bars.

5. The bars are marketed as a source of food energy for active, health conscious consumers who want to add a great tasting energy bar to their diet. The product literature sent out by the company refers to the XXXXX of the marketing and anticipates that the product will appeal to a broad range of consumers, from marathon runners to XXXXX.

6. The labeling on the carton of the XXXXX (the only packaging accompanying the company's submission to the Canada Custom and Revenue Agency ("CCRA")) clearly describes the bar as an XXXXX, a XXXXX and XXXXX. XXXXX XXXXX[.]

Ruling Requested

Supplies of the bars are zero-rated as basic groceries for GST/HST purposes under section 1 of Part III of Schedule VI to the Excise Tax Act ("the ETA").

Ruling Given

Based on the information provided, we rule that the bars are zero-rated as basic groceries under section 1 of Part III of Schedule VI to 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 tax at 7% (or 15% where supplies are made in one of the participating provinces applying 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 supplies of food and beverages for human consumption ("basic groceries") and many ingredients mixed with or used in the preparation of such food and beverages, unless one of the exceptions in paragraphs 1(a) through 1(r) applies. It is the CCRA's position that products which qualify and are labeled as nutritional supplements pursuant to the Regulations to the F&DA are considered basic groceries pursuant to section 1 of Part III of Schedule VI to the Act and, therefore, are zero-rated.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 952-9585.

Yours truly,

Pauline Greenblatt
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate