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.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 172719
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Application of GST/HST to the Supply of Surfactants and Adjuvants
Thank you for your memo dated September 9, 2015, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to surfactants and adjuvants. We apologize for the delay in replying.
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, based on the information you provided in your memo, that:
1. […].
2. The Company sells various […] [products] to the agricultural industry. Some of the products are pesticides, while others are commonly referred to as surfactants and/or adjuvants.
3. According to the Company, surfactants and/or adjuvants are to be used or applied with pesticides in order to protect crops against harmful effects of various pests.
RULING REQUESTED
You would like to know whether the supply of the following […] products that the Company supplies is zero-rated under section 10 of Part IV of Schedule VI.
[…]
[Product List A]
[Product List B]
RULING GIVEN
Based on the facts, we rule that the supply of the products listed as […][Product List A] under Ruling Requested is zero-rated under section 10 of Part IV of Schedule VI.
Based on the facts, we rule that the supply of the products listed as […][Product List B] under Ruling Requested is not zero-rated under section 10 of Part IV of Schedule VI.
EXPLANATION
Generally, in accordance with section 165, every recipient of a taxable supply made in Canada is required to pay GST/HST on the value of the consideration for the supply, unless the supply is zero-rated (listed in Schedule VI and subject to the GST/HST at the rate of 0%) or exempt (listed in Schedule V and not subject to the GST/HST).
Section 10 of Part IV of Schedule VI provides that a supply of prescribed property is zero-rated. Prescribed property is listed in the Agricultural and Fishing Property (GST/HST) Regulations (Regulations).
Subsection 1(4) of the Schedule in the Regulations provides that pesticides labelled in accordance with the Pest Control Products Regulations (PCPR) (pursuant to the Pest Control Products Act) as having a purpose that includes agricultural use and a product class designation other than “Domestic” are prescribed property.
For GST/HST purposes, a pesticide is any product (referred to as a “control product” in the PCPR) that is used as a means for directly or indirectly controlling, preventing, destroying, mitigating, attracting, or repelling any pest. Pesticides include herbicides, insecticides, fungicides, disinfectants, and rodenticides.
The Pest Management Regulatory Agency of Health Canada has issued the Regulatory Directive: Registration Requirements for Adjuvant Products (Dir 93-15) which explains the type of adjuvants which are subject to registration as a pest control product. As per the Regulatory Directive:
Under the authority of Section 2(a) of the Pest Control Products Act, a control product includes "any compound or substance that enhances or modifies or is intended to enhance or modify the physical or chemical characteristics of a control product to which it is added". Therefore, non-active ingredients which are (a) components of end-use formulations, or (b) adjuvants which are sold and used separately for in-tank mixing by the end-user, are subject to regulation. The former are considered in the evaluation process for registration of the end-use formulation.
For adjuvants which are sold separately, the requirement for registration will depend on the intended use or label claim. Adjuvants of the "activator or spray modifier" type which are intended to directly improve efficacy or to enhance biological performance of the control product by modifying or enhancing physical or chemical characteristics will be subject to registration provisions of the PCP [Pest Control Products] Regulations. "Utility modifier" adjuvants which do not directly improve efficacy, but widen the conditions under which a control product is useful or maintain integrity of the spray diluent, will not be subject to registration. Examples of utility modifier adjuvants are buffering agents, antifoam agents, and pesticide/liquid fertilizer compatibility agents. However, such products with label claims for improved biological performance may require registration.
As such, each surfactant or adjuvant is assessed based on its intended use or label claim. Where the adjuvant or surfactant is registered as a control product under the PCPR and it is stated as having a purpose that includes agricultural use and a product classification other than “Domestic” then it is considered to be a pesticide for purposes of subsection 1(4) of the Schedule in the Regulations. The supply of the product is therefore zero-rated under section 10 of Part IV of Schedule VI.
Products listed as [Product List A] under Ruling Requested are registered as control products under the PCPR and they are stated as having a purpose that includes agricultural use and a product classification other than “Domestic”. As such, the supply of these products is zero-rated under section 10 of Part IV of Schedule VI. Products listed as [Product List B] under Ruling Requested are not registered under the PCPR and the supply of these products is not zero-rated under section 10 of Part IV of Schedule VI.
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 905-721-5203. 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.
Yours truly,
Jill McDonald, CPA, CA
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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