GST/HST Ruling

Dear XXXXX:

Thank you for your letters of July 26 and August 7, 2001 with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to payments made under a XXXXX Services Agreement. As the transactions described in this letter all take place in XXXXX, reference will be made to the GST only.

Statement of Facts

Our understanding of the facts, the transactions, and the purpose of the transactions is as follows:

1) The City XXXXX (the City) entered into a five year XXXXX Services Agreement (Agreement) with XXXXX (Referred to elsewhere in the Agreement and in XXXXX XXXXX) (the Contractor).

2) The primary focus of the Agreement is the provision of efficient, cost-effective XXXXX services XXXXX

3) The Contractor will be the first company called by XXXXX XXXXX to perform XXXXX and associated services, in the following situations (except in case of emergency, or where the Contractor will be unable to respond within a reasonable amount of time):

XXXXX

4) XXXXX

5) XXXXX

6) During the term of the Agreement, the Contractor shall charge:

XXXXX XXXXX

7) XXXXX

8) The compensation to the City from the Contractor under the terms of the Agreement is a fixed payment of XXXXX per month.

Ruling Requested

Is the fixed monthly payment by the Contractor to the City subject to the GST?

Ruling Given

Based on the facts set out above, we rule that the monthly payment by the Contractor to the City is consideration for the right to be the first company called to provide XXXXX and associated services for the City of XXXXX. The supply of this right to preferential treatment supplied to the Contractor by the City does not fall under any exempting provisions in the Excise Tax Act (ETA). Therefore, GST applies to the monthly payment paid by the Contractor to the City for this right.

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 transactions for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9590.

Yours truly,

Elaine Bonnah
Municipalities and Health Care Services Unit
Public Service Bodies & Governments Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

Thank you for your letter of January 23, 2001, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of arena tickets at your national championships and other events. We apologize for the delay in our response.

Statement of Facts

Our understanding of the facts, the transaction(s), and the purpose of the transaction(s) is as follows:

1. XXXXX is a Canadian registered amateur athletic association and a registered charity (XXXXX). It is registered for GST/HST purposes.

2. The XXXXX holds XXXXX national championships each year. At each of these national championships, twelve teams representing all provinces and territories compete for the Canadian title.

3. Local volunteer host committees organize the Canadian championships on behalf of the XXXXX in XXXXX different venues each year.

4. The expenses for the staging of the championships are covered by revenue generated from ticket sales and sponsorships. The organizing committees are non-profit organizations.

5. Team members competing in a championship receive no cash remuneration for their participation in the championship. Their travel, accommodation and meals are either paid for or provided. Teams also receive clothing, team outfits for the women and team jackets for the men. The host committees usually present small gifts to the players (generally some local memento costing XXXXX or less per person).

6. The top three teams in each championship receive trophies, each worth approximately XXXXX. Each member of the men's winning team also receives a ring and watch and the members of the women's team each receive a ring, worth approximately XXXXX in total per person.

7. All the teams receive funding from the XXXXX to assist with their training prior to reaching the national competition. Women's teams receive XXXXX per team, men's teams receive XXXXX per team. The training expenses would greatly exceed these amounts.

8. Some events are held by the XXXXX, some by various non-profit organizations on behalf of the XXXXX.

9. The XXXXX also holds an Olympic qualifying event every XXXXX years. The organization of this event is identical to that of the annual championships.

Ruling Requested

The sales of arena tickets at XXXXX national championships and Olympic qualifying events are exempt supplies for GST/HST purposes.

Ruling Given

Based on the facts set out above, we rule that, provided the reimbursement of expenses and prizes and gifts given to competitors are a reasonable amount, the above supplies are exempt pursuant to section 11 of Part VI of Schedule V to 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

Section 11 of Part VI of Schedule V to the ETA provides that ticket sales to spectators are exempt if certain conditions are met. One of these conditions is that substantially all (90% or more) of the competitors involved in the event must not be remunerated, either directly or indirectly for their participation in the event "other than a reasonable amount as prizes, gifts, compensation for travel or for expenses incidental to the competitors' participation in the event."

To be considered reasonable, the value of the compensation paid to a competitor should not significantly exceed the costs actually incurred by the competitor in entering the event (i.e., travel and incidental expenses). In other words, a competitor may not receive material or financial gain from his or her participation in the event(s) if this exemption is to apply. Reasonable incidental expenses may include accommodation, food, travel, laundry, tips, telephone and equipment costs.

The determination of whether a prize or gift is considered reasonable must be made on a case-by-case basis. Factors to consider include the type and value of the prizes awarded. A ring valued at XXXXX would generally be considered a reasonable prize whereas a brand new car would not.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9592.

Yours truly,

Helena Ingr
Charities, NPOs and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

Thank you for your letter of September 28, 2001, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX ("the bars"), a nutritional supplement product. As mentioned to you previously, the treatment of nutritional supplement products is currently under review. If the treatment of nutritional supplement products changes as a result of this review, this change will be effective from the date it is publicly announced.

Our comments are set out below.

Statement of Facts

Our understanding of the facts of this case is as follows:

1. The bars qualify as nutritional supplements under the Food and Drugs Act ("F&DA") and the Regulations to the F&DA. Section B.01.001 of the Regulations to the F&DA defines "nutritional supplement" to mean "a food sold or represented as a supplement to a diet that may be inadequate in energy and essential nutrients."

2. As nutritional supplements, the bars must meet the nutritional profile, compositional and labeling requirements of the Regulations to the F&DA. They must contain 21 specified micronutrients (i.e. vitamins and minerals) within a range relative to their energy content, which is also regulated. Also, among other things, there are requirements for protein and fat content.

3. The bars are labeled as "nutritional supplements".

4. The bars are a combination of grain and fruit, half enrobed in a yogurt coating. They come in two flavours, XXXXX and XXXXX. They are 55 grams each and sold in XXXXX of XXXXX bars or XXXXX of XXXXX bars.

5. The bars are marketed as a source of food energy for active, health conscious consumers who want to add a great tasting energy bar to their diet. The product literature sent out by the company refers to the XXXXX of the marketing and anticipates that the product will appeal to a broad range of consumers, from marathon runners to XXXXX.

6. The labeling on the carton of the XXXXX (the only packaging accompanying the company's submission to the Canada Custom and Revenue Agency ("CCRA")) clearly describes the bar as an XXXXX, a XXXXX and XXXXX. XXXXX XXXXX[.]

Ruling Requested

Supplies of the bars are zero-rated as basic groceries for GST/HST purposes under section 1 of Part III of Schedule VI to the Excise Tax Act ("the ETA").

Ruling Given

Based on the information provided, we rule that the bars are zero-rated as basic groceries 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 ETA, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

Taxable supplies of goods and services made in Canada are generally subject to tax at 7% (or 15% where supplies are made in one of the participating provinces applying the HST). 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 and beverages for human consumption ("basic groceries") and many ingredients mixed with or used in the preparation of such food and beverages, unless one of the exceptions in paragraphs 1(a) through 1(r) applies. It is the CCRA's position that products which qualify and are labeled as nutritional supplements pursuant to the Regulations to the F&DA are considered basic groceries pursuant to section 1 of Part III of Schedule VI to the Act and, therefore, are zero-rated.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 952-9585.

Yours truly,

Pauline Greenblatt
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

Dear Sir:

Thank you for your letter of May 26, 2000 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the importation of XXXXX

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX is the importer of XXXXX powder mixtures which are imported in containers of XXXXX and XXXXX grams respectively.

XXXXX

2. XXXXX - there are approximately 34 different ingredients that comprise XXXXX, of which the principal ingredients per tablespoon are XXXXX.

3. The following directions for use appear on the XXXXX label:

Adults, blend or stir one (1) heaping tablespoon (approx. 9 grams) with six (6) ounces of water or juice, preferably away from meals

4. A warning to "Keep out of reach of children" is also present on the label.

5. A similar warning is also posted on the XXXXX Web site; this site provides information on a number of XXXXX products including XXXXX:

Warning: Accidental overdose of iron-containing products is a leading cause of fatal poisoning in children under 6. Keep this product out of reach of children. In case of accidental overdose, call a doctor or poison control center immediately.

XXXXX is also available in tablet form.

XXXXX

8. The sole ingredient in XXXXX is XXXXX.

9. The information on the label set out following directions for use:

Adults, take one (1) level tablespoonful (approx. 5.8 grams) daily with a minimum of 8 oz juice or other liquid preferably in between meals.

9. A warning to "Keep out of reach of children" is present on the label.

11. The following notice is posted on the XXXXX Web site in the product information section for XXXXX:

NOTICE: XXXXX should be eaten with at least a full glass of liquid. Eating XXXXX without a full glass of liquid may cause choking. Do not eat this product if you have difficulty swallowing.

10. The following statement is also posted on the Web site in the XXXXX product information section:

If you are pregnant, nursing, taking any medication or have a medical condition, please consult your healthcare practitioner before taking any dietary supplement.

XXXXX is also available in capsule form XXXXX.

Ruling Requested

XXXXX are zero-rated under the general provision of section 1 of Part III of Schedule VI to the Excise Tax Act (ETA) and as such XXXXX is not required to account for tax on the importation of XXXXX and XXXXX.

Ruling Given

Based on the facts set out above, we rule that XXXXX are taxable at 7% (or 15% as applicable) pursuant to section 165 of the ETA. XXXXX is required to account for tax on the importation of both products into Canada. XXXXX will be required to charge tax on the supply of the products in Canada unless it is a small supplier (i.e., total (gross) worldwide taxable revenues, including the worldwide revenues of all its associates do not exceed $30,000 annually).

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

Pursuant to section 1 of Part III of Schedule VI to the ETA, 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) are zero-rated unless otherwise indicated.

The terms "food" and "beverage" are not defined in the ETA. The CCRA position is that these terms are to be construed in accordance with their ordinary meaning. That is, "food" is a product consumed for enjoyment or to allay hunger, and a "beverage" is a product consumed for enjoyment or to quench thirst.

In order for a product to be considered an ingredient mixed with or used in the preparation of food or beverage, the purpose of consuming the resulting food or beverage to which the product is added, must be to allay hunger, quench thirst, or for enjoyment.

To determine whether the purpose of a product is to quench thirst, allay hunger, or for enjoyment, and not for its purported beneficial effects (e.g., gastrointestinal effect), the CCRA will consider the information on the label, the packaging and the marketing of that product.

Generally, if a product has restrictions on its label related to the amount to be consumed (e.g., 1 tsp.) or specifies frequencies or quantities of dosage, this is an indication that the product is not a food, beverage or an ingredient. In this instance, both XXXXX have directions indicating the recommended dosage.

XXXXX Adults, blend or stir one (1) heaping tablespoon (approx. 9 grams) with six (6) ounces of water or juice, preferably away from meals

XXXXX Adults, take one (1) level tablespoonful (approx. 5.8 grams) daily with a minimum of 8 oz juice or other liquid preferably in between meals.

The direction on the label also makes recommendations concerning when the product should be taken. It is suggested that XXXXX be consumed away from meals and XXXXX be consumed in between meals. Recommendations of this nature are not normally required for products that are food, beverages or ingredients.

Warnings on a product label concerning the consumption of that product (e.g., product not to be consumed by pregnant women or children) is also indicative that the product is not food, a beverage or an ingredient.

In the case of XXXXX, there is a warning on the label which indicates the product should be kept out of the reach of children. That warning is also repeated on the product site, and accompanied with a statement that "accidental overdose of iron-containing products is a leading cause of fatal poisoning in children." A warning to "keep out of reach of children" is also on the XXXXX label.

Both XXXXX an XXXXX are available in powder and tablet/capsule form. The fact that a product is available in pill, tablet or capsule form is an indicator that the product is not food, a beverage or an ingredient. The availability of a product in a form that is not normally associated with food, beverages or ingredients suggest that the consumer may be indifferent to the means of ingestion and thus the motive for consumption is other than to allay a hunger, quench thirst or enjoyment.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-8530.

Yours truly,

Dwayne Moore
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

This is in reply to your letter of March 23, 2000, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the XXXXX XXXXX bars (bar). Your inquiry was originally sent to our XXXXX Tax Services office, but was subsequently forwarded to our office for direct reply. Our comments are set out below.

Please accept our apologies for the delay in responding to you.

Statement of Facts

Our understanding of the facts of this case is as follows:

1. You are the customs broker for the XXXXX, which imports the bar into Canada, from the United States.

2. The bar qualifies and is labelled as a meal replacement pursuant to the Food and Drugs Act and its Regulations (F&DA). Section B.01.001 of the Regulations to the F&DA define a meal replacement to be a "formulated food that, by itself, can replace one or more daily meals". Further, meal replacements have specific caloric, fat content and vitamin and mineral requirements.

3. The principal ingredients consist of significant amounts of sweeteners, corn syrup, whey powder and cocoa coating. It also contains other ingredients such as peanut flour, toasted soy pieces, etc.

4. The bar is available in a pack (containing XXXXX bars with a net weight of XXXXX grams) with each bar weighing XXXXX grams. Each bar contains XXXXX essential nutrients as a source of energy.

Ruling Requested

Is the bar zero-rated for GST/HST purposes under section 1 of Part III of Schedule VI to the Excise Tax Act (ETA).

Ruling Given

Based on the facts set out above, we rule that the bar 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

Taxable supplies of goods and services made in Canada are generally subject to 7% GST (or 15% when the supplies are made in one of the provinces participating in the HST). 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 food and beverages for human consumption ("basic groceries") and many ingredients mixed with or used in the preparation of such food or beverages, unless one of the exceptions in paragraph 1(a) through 1(r) applies.

We have reviewed all information submitted on the bar. In particular, we note that the bar qualifies and is labelled as a meal replacement pursuant to the Regulations to the F&DA. It is the CCRA's position that products which qualify and are labelled as meal replacements pursuant to the Regulations to the F&DA are considered to be basic groceries pursuant to section 1 of Part III of Schedule VI to the ETA and, therefore, are zero-rated.

As stated in the facts, the bar is imported into Canada. Division III of the ETA provides that GST/HST is payable on dutiable goods (under the Customs Act) imported into Canada. Section 6 of Schedule VII to the ETA provides, in part, that goods included in Part III of Schedule VI (i.e. zero-rated basic groceries) are non-taxable importations. Since the bar is a zero-rated basic grocery under Part III of Schedule VI, it is non-taxable on importation into Canada.

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,

Pauline Greenblatt
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

Dear XXXXX

This is in reply to your letter of November 9, 2001, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to various flavours of XXXXX bars (bar). Your letter was originally sent to our XXXXX Tax Services office, but was subsequently forwarded to this office for reply. Our comments are set out below.

Statement of Facts

Our understanding of the facts of this case is as follows:

1. XXXXX (previously known as XXXXX) imports various flavours of the bar into Canada.

2. The bar is advertised as a nutritious energy bar, low in fat and formulated with natural ingredients. Product literature indicates that each bar has XXXXX vitamins and minerals, XXXXX grams of proprietary fiber blend and XXXXX grams of soy protein for enhanced muscle recovery. They are sold individually in XXXXX gram bars.

3. The manufacturer of the bar has recently changed its formulation so that all flavours of the bar qualify and are labelled as nutritional supplements, pursuant to the Food & Drugs Act (F&DA) and its Regulations. Section B.01.001 of the Regulations to the F&DA define a nutritional supplement to mean a "food sold or represented as a supplement to a diet that may be inadequate in energy and essential nutrients". Nutritional supplements must contain 21 specified micronutrients (i.e. vitamins and minerals) within a range relative to their energy content.

Ruling Requested

Is the bar zero-rated for GST/HST purposes pursuant to section 1 of Part III of Schedule VI to the Excise Tax Act (ETA)?

Ruling Given

Based on the facts set out above, we rule that the bar is zero-rated pursuant to section 1 of Part III of Schedule VI of 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 ETA, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

Taxable supplies of goods and services made in Canada are generally subject to 7% GST (or 15% HST when the supplies are made in one of the provinces participating in the HST). 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 food and beverages for human consumption ("basic groceries") and many ingredients mixed with or used in the preparation of such food or beverages, unless one of the exceptions in paragraph 1(a) through 1(r) applies.

We have reviewed all information submitted on the bar. In particular, we note that the bar has recently been reformatted and now qualifies and is labelled as a nutritional supplement pursuant to the Regulations to the F&DA. It is the Canada Customs and Revenue Agency's position that products which qualify and are labelled as nutritional supplements pursuant to the Regulations to the F&DA are considered to be basic groceries pursuant to section 1 of Part III of Schedule VI to the ETA and, therefore, are zero-rated.

As stated in the facts, the bar is imported into Canada. Division III of the ETA provides that GST/HST is payable on dutiable goods (under the Customs Act) imported into Canada.

Section 6 of Schedule VII to the ETA provides, in part, that goods included in Part III of Schedule VI (i.e. zero-rated basic groceries) are non-taxable importations. Since the bar is a zero-rated basic grocery under Part III of Schedule VI, it is non-taxable on importation into Canada.

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,

Pauline Greenblatt
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

Dear XXXXX

Thank you for your letter of April 11, 2002, with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the tax status of the product XXXXX (The Product).

Statement of Facts

1. The label of The Product includes the phrase: XXXXX

2. That is, each Product serving has the nutrition of one XXXXX, but in a convenient bar format.

3. Each bar contains approximately XXXXX of large flake oats.

4. The main ingredient is XXXXX. The Product XXXXX.

5. Flavours include: "XXXXX".

6. The Product will be packed and sold in XXXXX boxes, containing XXXXX, individually wrapped, bars.

7. The Product will be shelved in the same aisle and section as other 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%, (or 15% as applicable) pursuant to section 165 of 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.

Explanation

Taxable supplies of goods and services made in Canada are generally subject to tax at 7% (or 15% where the supplies are made in one of the provinces participating in the HST). 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 Excise Tax Act ("the Act").

Section 1 of Part III of Schedule VI to the Act zero-rates supplies of food or beverages for human consumption ("basic groceries") 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 Act, the following products are taxable at 7% (or 15% if applicable):

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

Therefore, a granola product is excepted from the exclusion in paragraph 1(h) and remains zero-rated if it is sold primarily as a breakfast cereal.

The expression "sold as a breakfast cereal" does not mean the same as "sold as an alternative to breakfast cereal". Furthermore, the ordinary and common meaning of the expression "breakfast cereal" is a product that is labelled as cereal to which you prepare by adding milk or water, and which is normally eaten at breakfast.

The Product is pressed into a bar and is labelled XXXXX. Furthermore, The XXXXX that the bar can be eaten other than by preparing by adding milk or water.

Therefore, The Product is not considered to be sold primarily as a breakfast cereal and falls within paragraph 1(h).

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-5124.

Yours truly,

Gabrielle Nadeau
Goods Unit
General Operations & Border Issues Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

This is in reply to your facsimile message of XXXXX, which was initially sent to our XXXXX TIS Center, but was subsequently transferred to our offices for direct reply. You asked about the application of the of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the XXXXX flavour of the XXXXX bar and the XXXXX XXXXX flavour of the XXXXX Bar, a nutritional supplement.

We note that we have already provided you with an Application Ruling on the XXXXX XXXXX flavour of the XXXXX bar XXXXX XXXXX. Therefore, this ruling will deal only with the XXXXX flavour of the XXXXX Bar ("bar").

Statement of Facts

1. The bar qualifies as a nutritional supplement, but not a meal replacement, pursuant to the Food & Drugs Act (F&DA) and it Regulations. Section B.01.001 of the Regulations to the F&DA defines "nutritional supplements" to mean "a food sold or represented as a supplement to a diet that may be inadequate in energy and essential nutrients".

2. As a nutritional supplement, the bar must meet the nutritional profile, compositional and labelling requirements of the Regulations to the F&DA. It must contain 21 specified micronutrients (i.e. vitamins and minerals) within a range relative to their energy content, which is also regulated. Also, among other things, there are requirements for protein and fat content.

3. The bar is labelled as a "nutritional supplement".

Ruling Requested

Is the XXXXX Bar zero-rated for GST/HST purposes under section 1 of Part III of Schedule VI to the Excise Tax Act (ETA)?

Ruling Given

Based on the facts set out above, we rule that the XXXXX Bar 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 ETA, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

Taxable supplies of goods and services made in Canada are generally subject to 7% GST (or 15% where the supplies are made in one of the provinces participating in the HST). 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 food and beverages for human consumption ("basic groceries") and many ingredients mixed with or used in the preparation of such food or beverages, unless one of the exceptions in paragraphs 1(a) through 1(r) applies.

We have reviewed all information submitted on the bar. In particular, we note the bar qualifies and is labelled as a nutritional supplement pursuant to the Regulations to the F&DA. It is the CCRA's position that products which qualify and are labelled as nutritional supplements pursuant to the Regulations to the F&DA are considered to be basic groceries pursuant to section 1 of Part III of Schedule VI to the ETA, and, therefore, are zero-rated.

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,

Pauline Greenblatt
Goods Unit
General Operations and Border Issues Unit Division
Excise and GST/HST Rulings Directorate

Dear XXXXX

Thank you for your letter of April 9, 2002, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transactions described below.

All legislative references are to the Excise Tax Act (the Act).

Statement of Facts

Our understanding of the facts and the transactions is as follows:

1. The XXXXX forms part of the XXXXX provincial government entity for purposes of the GST/HST.

2. The XXXXX has full ownership of a parcel of land that is currently used as a XXXXX. The land (the Property) is legally described as XXXXX document lists several lots within XXXXX, however, as you indicated in your phone call of XXXXX, the Property in fact is only one parcel of land and has only one legal description.

Proposed Transactions

1. The XXXXX will construct a multiple unit residential complex (the Complex) on the Property. The Complex will contain up to XXXXX residential units and will consist solely of residential units and related common areas.

2. Upon substantial completion of the Complex, the XXXXX will give possession of a residential unit in the Complex to a person under a lease, licence or similar arrangement (Lease). These persons will enter into the Lease for the purpose of occupying the residential unit as a place of residence.

3. The person (or an individual who is a tenant or licencee of the person) who enters into the Lease will be the first individual to occupy a residential unit in the Complex as a place of residence after substantial completion of construction of the Complex.

4. The XXXXX may decide to sell the Complex to a third person at an undetermined time in the future. Any such sale would not occur until a residential unit in the Complex has been supplied under the conditions noted in Fact #2. In any event, the sale is not expected to take place in the near future.

Rulings Requested

1. You are requesting confirmation that when the XXXXX commences to supply residential units in the Complex under a Lease, the XXXXX will be deemed to have received a taxable supply of the Complex by way of sale under subsection 191(3).

2. You are requesting confirmation that this deemed supply will not result in the XXXXX being required to pay tax because the XXXXX is a provincial government entity.

3. You are requesting confirmation that any subsequent sale of the Complex by the XXXXX will be exempt under section 5 of Part I of Schedule V to the Act.

Rulings Given

Although you requested an advance ruling on this matter, there is no certainty as to when the transactions are likely to be completed. As an advance ruling specifies time limits within which the transactions must be completed, we are providing you with a GST/HST application ruling.

Based on the facts and proposed transactions set out above, we rule that:

1. Where the conditions set out above have occurred, the XXXXX will be deemed to have made and received, at the later of the time construction of the Complex is substantially complete and the time possession of any residential unit in the Complex is given to a person in the circumstances described above, a taxable supply by way of sale of the Complex.

2. The deemed supply under subsection 191(3) will not result in the XXXXX having to pay or remit tax in respect of the deemed supply.

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 transactions for which you requested a ruling.

Interpretation Given

We are unable to provide a ruling on the tax status of a subsequent sale of the Complex by the XXXXX as the tax status of that sale will depend on events that take place during the time the XXXXX owns the complex. These events cannot be factually established at this time and we are therefore unable to issue a ruling on this matter. We can, however, provide the following interpretation.

Section 5 of Part I of Schedule V to the Act, in part, exempts the sale by a builder of a multiple unit residential complex or an addition thereto where the builder last acquired the complex or addition by way of a deemed sale under subsection 191(3). The sale is exempt provided that:

(a) the builder has not claimed an ITC in respect of the last acquisition of the complex (or addition), or in respect of an improvement to the complex (or addition) since the last acquisition, and

([b]) the builder has not substantially renovated the complex (or addition), or engaged another person to substantially renovate the complex (or addition) after the last acquisition of the complex (or addition) by the builder.

Should the conditions in section 5 of Part I of Schedule V be satisfied at the time the XXXXX sells the Complex, the sale will be exempt.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-4393.

Yours truly,

Hugh Dorward
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

Thank you for your letter of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of the various powdered products described below.

Statement of Facts

Our understanding of the facts, is as follows:

•   XXXXX [Product 'B'][.]

•   Product B is a powder consisting of: dried egg albumin, crystalline fructose, Dutch cocoa powder, cocoa powder, creatine monohydrate, natural flavours and sodium chloride.

•   Product B directions for consumption are: Mix 1/3 cup of Product B protein powder to 227 mL of orange juice. Mix for 10 seconds in a blender. Serve immediately.

•   The Product B directions state: XXXXX[.]

•   The Product B label states: XXXXX[.]

•   The Product B label also states: XXXXX[.]

•   The Product B label also states: XXXXX [Product 'C'][.]

•   Product C is a powder consisting of: soy protein isolate, crystalline fructose, maltodextrin, natural flavours, creatine monohydrate, cellulose powder, Jerusalem artichoke powder, corn bran, soy fiber, oat bran and potassium chloride.

•   Product C directions for consumption are: Mix 1/3 cup of Product C protein powder to 227 mL of orange juice. Mix for 10 seconds in a blender. Serve immediately.

•   The Product C directions state: XXXXX[.]

•   The Product C label states: XXXXX[.] The Product C label also states: XXXXX [Product 'D'][.]

•   Product D is a powder consisting of: beef protein, crystalline fructose, maltodextrin, corn syrup solids, creatine monohydrate and natural flavours.

•   Product D directions for consumption are: Mix 1/3 cup of Product D protein powder to 227 mL of orange juice. Mix for 10 seconds in a blender. Serve immediately.

•   The Product D directions state: XXXXX[.]

•   The Product D label states: XXXXX[.] The Product D label also states: XXXXX [Product 'E'][.]

•   Product E is a powder consisting of: soy protein isolate (soy lecithin), calcium caseinate, dried egg albumin (bacterial culture, citric acid, sodium carbonate, yeast autolysates), cocoa powder, artificial flavour, brewer's yeast, kelp, bromelain and papain.

•   Product E directions for consumption are: Mix 28 g (1/3 cup) with 227 mL (8 fl oz) of skim milk.

•   Product E is labelled as a Food Supplement.

•   The Product E label states: XXXXX [Product 'F'][.]

•   Product F is a powder consisting of: XXXXX Protein Mix (whey powder, calcium sodium caseinate, XXXXX [soy protein isolate], whey protein concentrate [lactalbumin], dried egg white [albumen]), crystalline fructose, maltodextrin, Dutch cocoa powder, tricalcium phosphate, natural flavour, magnesium oxide, soy lecithin, choline bitartrate, canola oil, oat bran, XXXXX Vitamin Mineral Premix (vitamin A acetate, ascorbic acid [vitamin C], thiamine mononitrate, niacinamide, reduced iron), papain, bromelain, para aminobenzoic acid, betaine, inositol.

•   Product F directions for consumption are: Mix one heaping 1/2 cup (89 g) of Product F to 454 mL (2 cups) of whole milk. Stir briskly until completely dissolved. A blender is recommended for ease of mixing. Serve immediately.

•   Product F is labelled as a Protein and Energy Food Supplement.

•   The Product F label states:XXXXX [Product 'G'][.]

•   Product G is a powder consisting of: XXXXX Protein Blend (whey protein concentrate, calcium sodium caseinate, milk protein isolate, potassium casseinate, dried egg albumen [bacterial culture, citric acid, sodium carbonate, yeast autolysates]), crystalline fructose, natural and artificial flavours, maltodextrin, corn syrup solids, microcrystalline cellulose, dicalcium phosphate dihydrate, MCT (medium chain triglyceride) oil, vitamin and mineral premix (vitamin A palminate, ascorbic acid [vitamin C], thiamine mononitrate, niacin, ferrous sulphate), guar gum, xanthan gum, dipotasssium citrate, betaine, wheat gluten, PABA, inositol, sodium citrate anhydrous and salt.

•   Product G directions for consumption are: Mix 70 g (2 scoops) with 454 mL (16 fl oz) of skim milk.

•   Product G is labelled as a Food Supplement.

•   The G label states: XXXXX [Product 'H'][.]

•   Product H is a powder consisting of: whey protein concentrate, whey protein isolate, natural and artificial flavours, cellulose gum, xanthan gum, carrageenan, and acesulfame potassium.

•   Product H directions for consumption are: Mix one (1) heaping scoop (30 g) of Product H with 1 cup (8 fl oz) cold water or milk. Mix thoroughly using a blender or shaker.

•   Product H is labelled as a Food Supplement.

•   The Product H label states:XXXXX [Product 'J'][.]

•   Product J is a powder consisting of: protein blend (calcium sodium caseinate, XXXXX [soy protein isolate], whey powder), crystalline fructose, maltodextrin, Dutch cocoa powder, guar gum, microcrystalline cellulose, tricalcium phosphate, potassium chloride, calcium carbonate, magnesium oxide, soy lecithin, canola oil, sodium chloride, choline bitartrate, para aminobenzoic acid, betaine, inositol, papain, bromelain, vitamin mineral premix (vitamin A acetate, ascorbic acid [vitamin C], thiamine, mononitrate, niacinamide, reduced iron), and natural and artificial flavour.

•   Product J directions for consumption are: Mix 1/3 cup (45 g) of Product J to 227 mL (1 cup) of skim milk. A blender is recommended for ease of mixing. Serve immediately. For variety try adding your favorite fruit.

•   Product J is labelled as a Protein Supplement.

•   The Product J label states:XXXXX [Product 'K'][.]

•   Product K is a powder consisting of: Maltodextrin, XXXXX Protein Blend (whey protein concentrate [lactalbumin], calcium sodium caseinate, XXXXX [soy protein isolate], whey powder, dried egg albumin), fructose, dextrose, Dutch cocoa powder, cocoa powder, calcium carbonate, natural and artificial flavours, creatine monohydrate, MCT medium chain triglyceride oil [fractionated coconut oil], XXXXX vitamin mineral premix [vitamin A acetate, ascorbic acid, thiamine mononitrate, niacinamide, reduced iron, para amino benzoic acid, betaine base anhydrous, myo-inositol, choline bitartrate].

•   Product K directions for consumption are: As a food supplement, mix in a blender, six (6) heaping scoops of Product K with six (6) cups (1362 mL) of 2% milk. For a smaller serving, mix three (3) heaping scoops of Product K with three (3) cups (681 mL) of 2% milk. Product K can be prepared in advance and consumed throughout the day.

•   Product K is labelled as a Protein and energy food supplement.

•   The Product K label states:XXXXX [Product 'L'][.]

•   Product L is a powder consisting of: Maltodextrin, XXXXX Protein Blend (skim milk powder, whey protein concentrate [lactobalbumin], calcium caseinate, dried egg white), corn syrup solids, dextrose, fructose, MCT medium chain triglyceride oil (fractionated coconut oil), potassium chloride, carrageenan, natural and artificial flavours, XXXXX nutrient blend (vitamin A acetate, ascorbic acid, thiamine mononitrate, niacinamide, reduced iron, para amino benzoic acid, betaine base anhydrous, myo-inositol, choline bitartrate), papain, and bromelain.

•   Product L directions for consumption are: To 3 cups (681 mL, 24 fl oz) of 2% partly skim milk, add 4 scoops of [Product L] powder. Mix for 30 seconds in a blender until dissolved and serve.

•   The label for Product L does not give an indication of the purpose of consumption but according to the promotional material found at the manufacturers website XXXXX, the product is promoted in the following manner:

XXXXX [Product 'M']

•   Product M is a powder consisting of pure creatine monohydrate.

•   Product M directions for consumption are: As a dietary food supplement for adults, take one teaspoon 3-4 times daily for three days. Thereafter, take 1 teaspoon twice daily. Can be taken with meals or on an empty stomach. Take with juice or water.

•   The Product M label states: XXXXX[.] The manufacturers website XXXXX, promotes the product in the following manner:

XXXXX

Ruling Requested

Are the listed products zero-rated supplies pursuant to section 1 of Part III of Schedule VI to the Excise Tax Act (ETA)?

Ruling Given

Based on the facts set out above, we rule that all of the listed products are taxable at the GST rate of 7% or the HST rate of 15% in participating provinces pursuant to section 165 of 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. Where, however, a supply is a zero-rated supply, the tax rate in respect of that supply is 0%.

The supply of basic groceries, which includes the majority of supplies of food and beverages marketed for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of such food or beverages), is zero-rated pursuant to Part III of Schedule VI to the Excise Tax Act (ETA).

The terms 'food' and 'beverage' are not defined in the ETA. The CCRA position is that these terms are to be construed according to their ordinary meaning. That is, a food or a beverage is a good that an average consumer would recognize and purchase as a food or beverage in the ordinary course of buying basic groceries. Products that meet special dietary needs of certain segments of the population such as those with restricted or special purpose diets, high performance athletes and dieters may not necessarily be viewed by the average consumer as a food or a beverage.

Consumers usually consume food for enjoyment or to allay hunger, while beverages are usually consumed for enjoyment or to quench thirst. Therefore, the CCRA generally considers 'food' and 'beverages' as goods consumed to sustain or maintain life, to allay hunger or thirst, or for enjoyment rather than for therapeutic or preventative effects or to achieve specific beneficial effects related to performance or physique.

Products that are labelled or marketed as products to be consumed to facilitate their intake of certain ingredients (nutritive or otherwise) or which place an emphasis on claims relating to the benefits of the product, for example, therapeutic or preventative effects, or enhancing performance or physique, are not considered to be products that an average consumer would ordinarily purchase in the course of buying food or beverages. Rather, these products are represented as being for another purpose and so are not considered to be basic groceries.

Additionally, a product that is marketed for its beneficial effects, and that is added to a food or beverage simply as a means of consuming it, would not be considered by an average consumer as an ingredient simply because it is ingested in this manner.

There are a number of factors that the CCRA considers in determining whether a product would be considered by an average consumer to be a food, beverage or ingredient.

A factor in determining whether a product is a food, beverage or ingredient is if the product identifies itself as a 'supplement', 'dietary supplement', 'food supplement' or similar terminology. (Note that this factor does not apply to products that are labelled in accordance with the Food and Drugs Act as "nutritional supplements".) Such identification may be an indication that the product is consumed for the purpose of enhancing or improving a person's state of health and not as a food, beverage or ingredient. In this case, Product B, C, D, E, F, G, H, J, K and M identify themselves as a kind of 'supplement'.

Products that emphasize the purity or superior quality of a particular nutrient and relate that nutrient to a therapeutic or beneficial health effect or enhanced mental or physical performance are consumed for that purpose and not as a food, beverage or ingredient. Product B, C, D, E, H, J, K, L, and M link consumption of the product with enhanced physical performance, especially in relation to bodybuilding.

Directions for use or restrictions relating to the amount to be consumed are generally not characteristics of products that the average consumer would consider to be a food, beverage or ingredient. Such directions or restrictions indicate that the product is being consumed for a purpose other than as a food, beverage or ingredient. Product B, C, D, H, and M have directions of use or restrictions.

Product F, G, H, J, and M contain health warnings as to who should not consume the product. Products that the average consumer would consider to be a food, beverage, or ingredient normally do not carry health warnings.

The product names of Product F, J, K, and L and the pictorial representations on the labels of Product E, G, H would lead a consumer to conclude that the principal purpose of consuming the product is for a therapeutic or preventative effect, to enhance mental or physical performance, to enhance physique or to promote weight loss.

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,

Kevin W. Smith
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

Thank you for your letter of XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the products described below.

Statement of Facts

Our understanding of the facts, is as follows:

XXXXX [Product A]

1. Product A is a strawberry-flavoured liquid manufactured by XXXXX. (the manufacturer) of XXXXX[.]

2. XXXXX exclusively distributes Product A in Canada.

3. Product A is labelled as a "Nutritional Supplement".

4. XXXXX Product A provides the body with high-quality protein and carbohydrates as well as a wide array of vitamins, minerals and other important micronutrients vitally important to your efforts to build a better body.

XXXXX [Product B]

1. Product B is a strawberry-flavoured whey protein powder manufactured by XXXXX (the manufacturer) of XXXXX[.]

2. The Product B label states that it provides XXXXX and that the product is XXXXX.

3. The product has directions for use as follows: Add 1 scoop to 150-200 ml cup of liquid, sauce or mix. Stir until dispersed, then drink immediately. Note the extra calories provided by milk, yogurt etc. You can add more or less liquid to meet your desired taste.

4. XXXXX XXXXX is as follows:

XXXXX

Ruling Requested

Are supplies of Product A and Product B zero-rated pursuant to section 165 of the Excise Tax Act (ETA)?

Ruling Given

Based upon the facts set out above, we rule that Product A as a nutritional supplement is zero-rated. We also rule that Product B is taxable at 7% (or 15% as applicable) pursuant to section 165 of the ETA. This supercedes our ruling of XXXXX concerning Product B.

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

A supply 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) is zero-rated (i.e., taxed at a rate of 0%) pursuant to section 1 of Part III of Schedule VI to the Excise Tax Act (ETA). Certain food or beverages (e.g., carbonated beverages) are taxable at 7% (or 15% if made in a province participating in the Harmonized Sales Tax) because they are excluded from zero-rating by paragraphs 1(a) to 1(r) of Part III.

It should be noted that products which qualify and are labelled as "nutritional supplements" or "meal replacements" pursuant to the Food and Drugs Act and Regulations are considered food or beverages for purposes of section 1 of Part III of Schedule VI to the ETA. Moreover, they are not subject to the exclusions under paragraphs 1(a) to 1(r) of Part III and, therefore, are zero-rated.

The terms "food" and "beverage" are not defined in the ETA. The CCRA considers that a product is a food or a beverage if an average consumer would recognize and purchase the product as a food or beverage in the ordinary course of buying basic groceries. Put differently, products would be considered to be a food or a beverage if they would be consumed by an average consumer when food or beverages are typically consumed, such as at mealtimes or for a snack. Products that meet special dietary needs of certain segments of the population such as those with restricted or special purpose diets, high performance athletes and dieters may not necessarily be viewed by the average consumer as food or beverages. In addition, individual preferences for, or dislikes of, certain products would not alter general perceptions of food or beverages.

Consumers usually consume food for enjoyment or to allay hunger, while beverages are usually consumed for enjoyment or to quench thirst. That is, food and beverages are consumed to sustain or maintain life, to allay hunger or thirst, or for enjoyment, rather than for therapeutic or preventative effects (e.g., to correct actual or perceived health problems) or to achieve specific beneficial effects related to performance or physique. Therefore, products that are labelled, packaged or marketed as products to be consumed to facilitate the intake of certain ingredients (nutritive or otherwise) or which place an emphasis on claims relating to the benefits of the product, for example, therapeutic or preventive effects, or enhancing performance or physique, are not considered to be products that an average consumer would ordinarily purchase in the course of buying food or beverages.

Furthermore, the CCRA considers a product to be an ingredient if an average consumer would recognize the product as an ingredient into food or a beverage, and it is the view of the CCRA that an average consumer would consider a product to be an ingredient if the product added to flavour, texture or appearance of the final product; that is, if it was integral to the final product. As with food and beverages, it is also recognized that products that are consumed for their therapeutic, preventative, or performance or physique enhancing properties would not be recognized by an average consumer as ingredients. Moreover, in order to be regarded as an ingredient to a food or beverage, the final product, in and of itself, would be considered to be a food or beverage by the average consumer.

Finally, a product that is marketed for its beneficial effects, and that is added to a food or beverage simply as a means of consuming it, would not be considered by an average consumer as an ingredient simply because it is ingested in this manner

If a product's tax status is in doubt, the CCRA will consider the manner in which the product is labelled, packaged, and marketed to determine its tax status. There are a number of factors that the CCRA considers in determining whether a product would be considered by an average consumer to be a food, beverage or ingredient. The following are some of the factors that apply to Product A and B:

•   If a product identifies itself as a 'supplement', 'dietary supplement', 'food supplement' or similar terminology, this is an indication that the product is consumed for the purpose of enhancing or improving a person's state of health and not as a food, beverage or ingredient.

XXXXX Product A is labelled as a 'nutritional supplement'. As noted above, products that meet the 'nutritional supplement' labelling and nutritional requirements of the Food and Drugs Act are zero-rated.

•   Product advertising, whether through print or electronic media, that includes a claim related to purported beneficial effects (as mentioned above) indicates that the product is intended to be consumed for purposes other than as a food, beverage or ingredient.

Product B XXXXX which indicates that the product is intended to be consumed for a purpose other than as a food, beverage or ingredient.

•   Products that emphasize the purity or superior quality of a particular nutrient and relate that nutrient to a therapeutic or beneficial health effect or enhanced performance or physique are not considered to be consumed as a food, beverage or ingredient.

In addition to the purported beneficial effects that the manufacturer of Product B makes, the manufacturer also states that the product is XXXXX[.] 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,

Kevin W. Smith
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

Thank you for your letter of XXXXX ), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX (the Product) manufactured by your client, XXXXX.

Statement of Facts

Our understanding of the facts, is as follows:

1. The Product is a fortified, XXXXX that is available in two types; vitamin-fortified (vitamins A, C and E) or XXXXX.

2. The Product is available in a variety of flavours including: XXXXX and XXXXX for the vitamin-fortified type and XXXXX and XXXXX for the XXXXX.

3. The Product has been issued a Drug Identification Number (DIN).

4. The Product separately identifies the ingredients as either active or non-medicinal. The active ingredient of the XXXXX Product is XXXXX XXXXX. The active ingredients of the vitamin-type Product are Beta-Carotene (a source of Vitamin A), Vitamin C, and Vitamin E (as dl-alpha-tocopheryl acetate).

5. According to the Product label, adults and children over XXXXX should XXXXX XXXXX daily as desired. The XXXXX Product package contains only XXXXX XXXXX[.]

6. XXXXX the Product is identified as a dietary supplement and marketed as follows:

XXXXX XXXXX XXXXX

Ruling Requested

The Product is a zero-rated supply pursuant to section 1 of Part III of Schedule VI to the Excise Tax Act (ETA).

Ruling Given

Supplies of the Product are taxable at 7% GST (or 15% if made in a province participating in the Harmonized Sales Tax [HST]) pursuant to section 165 of 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

A supply 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) is zero-rated (i.e., taxed at a rate of 0%) pursuant to section 1 of Part III of Schedule VI to the ETA. Certain food or beverages (e.g., carbonated beverages) are taxable at 7% (or 15% in participating provinces) because they are excluded from zero-rating by paragraphs 1(a) to 1(r) of Part III.

The terms "food" and "beverage" are not defined in the ETA. The CCRA considers that a product is a food or a beverage if an average consumer would recognize and purchase the product as a food or beverage in the ordinary course of buying basic groceries. Put differently, products would be considered to be a food or a beverage if they would be consumed by an average consumer when food or beverages are typically consumed, such as at mealtimes or for a snack.

Products that meet special dietary needs of certain segments of the population such as those with restricted or special purpose diets, high performance athletes and dieters may not necessarily be viewed by the average consumer as food or beverages. In addition, individual preferences for, or dislikes of, certain products would not alter the general perception that a product was, or was not a food or beverage. Also, certain flavoured or sweetened products (e.g., sweetened, medicated throat lozenges) that have a pleasing taste may, nevertheless, not be regarded by the average consumer to be a food or beverage as they are consumed for their purported beneficial effects. Therefore, despite the fact that these products are pleasant tasting, they do not fall within the meaning of "food" for purposes of Part III of Schedule VI to the ETA.

Consumers usually consume food for enjoyment or to allay hunger, while beverages are usually consumed for enjoyment or to quench thirst. That is, food and beverages are consumed to sustain or maintain life, to allay hunger or thirst, or for enjoyment, rather than for therapeutic or preventative effects (e.g., to correct actual or perceived health problems) or to achieve specific beneficial effects related to performance or physique. Therefore, products that are labelled, packaged or marketed as products to be consumed to facilitate the intake of certain ingredients (nutritive or otherwise) or which place an emphasis on claims relating to the benefits of the product, for example, therapeutic or preventive effects, or enhancing performance or physique, are not considered to be products that an average consumer would ordinarily purchase in the course of buying food or beverages.

If a product's tax status is in doubt, the CCRA will consider the manner in which the product is labelled, packaged, and marketed to determine its tax status. There are a number of factors that the CCRA considers in determining whether a product would be considered by an average consumer to be a food, beverage or ingredient. The following are some of the factors that apply to the Product:

•   Products that are represented for a therapeutic or preventative use or to achieve specific beneficial effects relating to performance or physique are not considered to be basic groceries. The XXXXX Product emphasizes XXXXX content of the product and the benefits of consuming the Product to XXXXX. The vitamin-type Product emphasizes the vitamin A, C and E content on the label.

•   Often when a product is marketed as a dietary supplement, the label will list separately those components that are considered "active" (i.e., considered to contribute to the therapeutic effect) and "non-active" ingredients (i.e., those that do not contribute to the therapeutic effect). The Product separately lists ingredients as either active or non-medicinal.

•   Directions for use or restrictions relating to the amount to be consumed are generally not characteristics of products that the average consumer would consider to be a food, beverage or ingredient. Such directions or restrictions indicate that the product is being consumed for a purpose other than as a food, beverage or ingredient. The Product recommends that only adults and children over XXXXX should consume the Product. The Product has a recommended daily adult dose of XXXXX.

•   The presence of a Drug Identification Number, although not determinative in itself, is an indication that the Product is promoted and consumed for its beneficial effects on personal health. The Product has been issued a Drug Identification Number (DIN).

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,

Kevin W. Smith
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate