15 January 2003 GST/HST Ruling 43562 - Application of the GST/HST to Crackers

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 Crackers (the Product).

Statement of Facts

Our understanding of the facts is as follows:

1. The Product is available in XXXXX flavours: XXXXX.

2. Ingredients of the XXXXX flavour of the Product include: XXXXX[.]

3. The Product is labelled as a cracker, packaged loosely in XXXXX boxes and is located in the cracker isle of the supermarket.

4. Market research indicates that XXXXX Marketing on the box states that the Product is "XXXXX[".]

Ruling Requested

You requested confirmation that XXXXX Crackers are zero-rated basic groceries as described in Part III of Schedule VI to the Excise Tax Act (ETA).

Ruling Given

Based on the facts set out above, we rule that the Product is zero-rated 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 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

Generally, every recipient of a taxable supply made in Canada shall pay to Her Majesty in right of Canada tax in respect of the supply calculated at the GST rate of 7% or HST rate of 15%, as applicable, on the value of the consideration for the supply. However, zero-rated supplies of goods and services are subject to tax at 0%. Section 1 of Part III of Schedule VI to the ETA zero-rates supplies of basic groceries subject to the exclusions listed in paragraphs 1(a) through 1(r).

Paragraph 1(f) excludes from zero-rating supplies of:

"chips, crisps, puffs, curls or sticks (such as potato chips, corn chips, cheese puffs, potato sticks, bacon crisps and cheese curls), other similar snack foods or popcorn and brittle pretzels, but not including any product that is sold primarily as a breakfast cereal".

GST/HST Policy Statement P-241 - Meaning of "Other Similar Snack Food" under paragraph 1(f) of Part III of Schedule VI to the ETA, provides several factors that may be used to determine if a product is a similar snack food. These factors include: properties (ingredients, flavours, texture, cooking process and appearance), labelling, packaging and marketing.

While the Product may have some properties similar to those listed in P-241, the labelling, packaging and marketing are different from those generally used for "other similar snack food"; more specifically, the Product is not referred to as a chip, crisp, puff, curl or stick, nor is it placed in the snack food isle of supermarkets. The Product is labelled as a cracker, is packaged in XXXXX boxes and is sold in the cracker isle of supermarkets.

Having reviewed the facts of this case, it is the opinion of the Canada Customs and Revenue Agency that the Product is not an "other similar snack food" as listed in paragraph 1(f) of Part III of Schedule VI to the ETA. The supply of the Product is zero-rated as it does not fall within any of the exclusions to section 1 of Part III of Schedule VI to the ETA.

It should be noted that no one factor is determinative of the tax status of a product and changes in the labelling, packaging and/or marketing would not necessarily result in a different tax status. That is, all factors must be considered in determining whether a product falls within paragraph 1(f).

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 Operations and Border Issues Division
Excise and GST/HST Rulings Directorate