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.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 247676
Business Number: […]
Dear [Client]:
Subject: GST/HST ruling
GST/HST on supplies of […][a sweet snack]
Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) on supplies of […][a sweet snack] (the Product).
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand the following:
1. The Product is made in […], distributed in […] by […](the Distributor) and sold by […](the Retailer).
2. The Product is identified on the packaging as […].
3. The Product is packaged in a […] gram resealable bag that contains approximately […] pieces of the Product. The pieces are not individually wrapped.
4. The Product is created by the Retailer under its candy category and is sold alongside confectionary items and cookies.
5. The ingredients of the Product, as listed on the product packaging, are as follows:
Milk Chocolate […]
6. Marketing contained on the Distributor’s corporate website […] describes the Product as a […].
RULING REQUESTED
You would like to know whether the supply of the Product is zero-rated under section 1 of Part III of Schedule VI.
RULING GIVEN
Based on the facts set out above, we rule that the supply of the Product is a taxable supply that is excluded from zero-rating under paragraph 1(e) of Part III of Schedule VI of the ETA.
EXPLANATION
Section 1 of Part III of Schedule VI zero-rates supplies of food or beverages for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of such food or beverages) unless an exclusion set out in paragraph 1(a) through 1(r) of that section applies.
Paragraph 1(e) excludes from zero-rating candy, confectionery that may be classed as candy, or any goods sold as candies, such as candy floss, chewing gum and chocolate, whether naturally or artificially sweetened, including fruits, seeds, nuts and popcorn when they are coated or treated with candy, chocolate, honey, molasses, sugar, syrup or artificial sweeteners.
This exclusion is intended to apply quite broadly as it applies not only to candy, but also to supplies of confectionery which may be classed as candy and supplies of goods which are sold as candy. Furthermore, it applies whether the product at issue is artificially or naturally sweetened. Thus, the exclusion is intended to apply not only to supplies of candy but supplies of anything that is likely to compete with candy in the marketplace. Accordingly, if the main ingredient is a form of sugar or chocolate, this is a strong indicator that the item is a candy or confectionery as it will likely compete with other candies or confectionery. However, certain foods with sugar or chocolate as a main ingredient may not by their nature fall within this paragraph. With such items, the marketing of the item can give a strong indication of the nature of the product.
It is CRA’s position that where sugar or chocolate are the main ingredient, the product will ordinarily fall within paragraph 1(e) unless the nature of the product indicates that it should not be classed as a candy, confectionery that may be classed as candy or goods sold as candies.
In light of the above, it is our opinion that the Product is excluded from zero-rating under paragraph 1(e) as candy, confectionary classed as candy or goods sold as candies for the following reasons:
- milk chocolate is a significant ingredient for the Product;
- the Product is sold as a snack comprising of […] bite-sized pieces;
- the Product is packaged and marketed similar to other candies, confectionary classed as candy or goods sold as candies; and
- the Product is sold in the marketplace alongside other candies, confectionary classed as candy or goods sold as candies.
The Product is therefore taxable at the full rate for GST/HST purposes.
DISCLAIMER
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 289-356-2627.
Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Sincerely,
Zubair Patel
Senior Rulings Officer
Strategic and Emerging Issues Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate
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