28 March 2013 GST/HST Ruling 141573 - GST/HST status of supplies of plant material

Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.

Dear [Client]:

Thank you for your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of plant material.

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 15% in Nova Scotia, and 12% in British Columbia. The GST applies in the rest of Canada at the rate of 5%.

Effective April 1, 2013, the 12% HST in British Columbia will be replaced by the 5% GST and a provincial sales tax. It is also proposed that, effective April 1, 2013, the provincial sales tax and the 5% GST currently in effect in Prince Edward Island will be replaced by a 14% HST.

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

Statement of Facts

We understand the facts to be as follows:

1. […] (Company A) supplies plant material grown to produce food for human consumption.

2. The plant material is grown, sold and shipped in […].

3. All plant material is rooted with or without leaves.

4. All plant material is propagated from tissue culture, soft or hardwood cuttings, or seed.

5. The ruling request is for the following plant material (the Products): […]

Ruling Requested

You would like to know the application of the GST/HST to supplies of the Products.

Ruling Given

Based on the facts set out above, we rule that supplies of the Products are taxable.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

Generally, every recipient of a taxable supply made in Canada shall pay tax calculated at the rate of 5% on the value of the consideration for the supply (15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia) unless the circumstances of the supply satisfy a specific exemption or relieving provision.

Paragraph 2(a) of Part IV of Schedule VI provides zero-rating for supplies of grains or seeds in their natural state, treated for seeding purposes or irradiated for storage purposes.

The Products have germinated insofar as they have grown roots and shoots and are, by definition, no longer seeds for sowing, therefore, the Products are not seeds for GST/HST purposes. The Products are plants for purposes of the GST/HST and there is no relieving provision for supplies of plants.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-5124. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Angela Stachowski
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate