8 December 2003 GST/HST Interpretation 48287 - Application of GST/HST on Meal Replacement Bars

Please note that the following documents, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ces documents, bien qu'exacts au moment émis, peuvent ne pas représenter la position actuelle de l'Agence.

Dear XXXXX

Thank you for your letter XXXXX, with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of XXXXX (the product).

Statement of Facts

1. The product will be packaged and sold in XXXXX boxes, containing XXXXX, individually wrapped, XXXXX.

2. The primary ingredient is whole grain rolled oats.

3. The product is baked.

4. The product is available in XXXXX[.]

5. The product label includes the phrase: XXXXX.

6. XXXXX[.]

7. The nutritional information provided indicates that XXXXX[.]

8. The product will be shelved in the same aisle and section as other oatmeal products such as hot cereal and bars.

9. The product will compete with cereal bars.

Ruling Requested

The product is zero-rated under Part III of Schedule VI to the Excise Tax Act (ETA) as a meal replacement.

Ruling Given

Based on the facts set out above, we rule that the product is taxable at 7%, (or 15% as applicable) 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 and transaction(s) 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 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.

Although section 1 of Part III of Schedule VI to the ETA makes no specific references to meal replacements, Paragraph 20 of Section 4.3 - Basic Groceries of the GST/HST Memoranda Series states "Meal replacement bars are zero-rated as basic groceries".

It is understood by the CCRA that products labeled as meal replacements or nutritional supplements must meet the requirements of both the Food and Drug Act and Regulations and the Consumer Packaging and Labeling Act. It is the position of the CCRA that if a product is represented as being a meal replacement or nutritional supplement as evidenced by its label, then the CCRA will accept this information as fact in determining its tax status. As the product is not labeled as a meal replacement, it therefore cannot be zero-rated as a meal replacement.

Section 1 of Part III of Schedule VI to the ETA zero-rates supplies of food or beverages for human consumption ("basic groceries") and sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, unless one of the exclusions set out in paragraphs 1(a) through 1(r) applies.

Paragraph 1(m) of Part III of Schedule VI to the ETA excludes from zero-rating supplies of:

cakes, muffins, pies, pastries, tarts, cookies, doughnuts, brownies, croissants with sweetened filling or coating, or similar products where

(i) they are prepackaged for sale to consumers in quantities of less than six items each of which is a single serving, or

(ii) they are not prepackaged for sale to consumers and are sold as single servings in quantities of less than six,

but not including bread products, such as bagels, English muffins, croissants or bread rolls, without sweetened filling or coating;

It is the CCRA's position that the product is considered to be a "similar product" for the purposes of paragraph 1(m) of Part III of Schedule VI to the ETA. As such, when this product is sold individually, or in consumer packages of less than 6 single servings, the supply will be taxable at 7% or 15%, as applicable.

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,

Nicole Thomas
Goods Unit
General Operations & Border Issues Division
Excise and GST/HST Rulings Directorate