7 August 2003 GST/HST Ruling 46815 - Tax Status of Cereal

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 XXXXX (the Product).

Statement of Facts

1. The Product is packaged in XXXXX cartons that are approximately XXXXX grams each. Each carton contains XXXXX of approximately XXXXX grams each.

2. The product is available in the following flavours: XXXXX[.]

3. The main ingredients in the XXXXX flavour of the Product include: Rolled Oats, sugar/glucose-fructose, fruit pieces, rice, vegetable shortening, brown sugar, fructose, whole wheat, hydrogenated palm kernel oil, glycerin, natural and simulated flavours, salt, soya lecithin, milk ingredients, vitamins.

4. The Product package label states: XXXXX[.]

Ruling Requested

What is the tax status of the Product?

Ruling Given

Based on the facts set out above, we rule that the Product is taxable at 7% GST or 15% HST, as applicable, pursuant to section 165 of the Excise Tax Act (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 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% GST or 15% HST, as applicable. 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 or beverages for human consumption 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.

In accordance with paragraph 1(h) of Part III of Schedule VI of the ETA, the following products are taxable at 7% GST or 15% HST if applicable:

"granola products, but not including any product that is sold primarily as a breakfast cereal."

As the Product falls under this exclusion, it is taxable at 7% GST or 15% HST, 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