30 June 2003 GST/HST Ruling 46184 - Supply of Promotional [Activities With Respect to the Business of Selling Food for Human Consumption]

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 a XXXXX (the Product) that also contains a promotional XXXXX.

Statement of Facts

1. The Product is a XXXXX that requires preparation by the consumer.

2. There are XXXXX different XXXXX available. Each promotional package will contain one XXXXX[.]

3. The XXXXX is being included temporarily in an effort to increase sales.

4. XXXXX

5. The Company's cost of the XXXXX is approximately XXXXX. The Company's cost of the Product is considerably more.

6. XXXXX[.]

7. XXXXX[.]

8. The value of the consideration for the Product supplied together with the XXXXX will be either the same or marginally different than the consideration for the Product alone.

9. The Company is in the business of selling food for human consumption, and does not ordinarily sell or distribute non-food items, except in connection with promotional activities.

Ruling Requested

What is the tax status of the supply of XXXXX the Product with a promotional XXXXX?

Ruling Given

Based on the facts set out above, we rule that XXXXX the Product containing the promotional XXXXX is zero-rated pursuant to section 1 of Part III of Schedule VI to the Excise Tax Act.

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.

You also indicated in your letter that the Company will continue to offer these types of higher value promotional items with its food products and asked for some written guidelines in this area. Supplies of such promotional items will be evaluated on a case by case basis to see if they meet the criteria of section 138 of the ETA and can therefore be zero-rated as incidental supplies to basic groceries. Please find attached GST/HST Policy Statement P-159R1: Meaning of the Phrase "Reasonably Regarded as Incidental", which provides some guidelines that may be used to determine if a supply can be regarded as incidental.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9218.

Yours truly,

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

Encl.: P-159R1: Meaning of the Phrase "Reasonably Regarded as Incidental"