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, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 204902
Dear [Client]:
Subject: GST/HST RULING
Application of GST/HST to [plant-based] protein powders
Thank you for your letter dated [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of […][plant-based] Protein Powder […][Product A, Product B and Product C]. We apologize for the delay in responding.
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. On […] (the manufacturer) website […], the packaging for Product A represents the product as being: […]
2. Additional information […][about Product A].
3. On the manufacturer’s website, Product A is described as follows: […]
4. The only ingredient for Product A is […][plant-based] Protein Isolate.
5. The marketing on the website […] describes Product B […].
6. […][Additional information about Product B]
7. The ingredients for Product B are isolated […][plant-based] protein and […][plant-based] lecithin.
8. The website […] marketing for Product C provides the following uses: […]
9. Product C is further described as […]
10. Product C is described on the website as follows: […]
11. The only ingredient for Product C is […][plant-based] protein powder.
12. The section under which the Products are [marketed] is […].
RULING REQUESTED
You would like to know if Product A, B and C are zero-rated basic groceries under section 1 of Part III of Schedule VI.
RULING GIVEN
Based on the facts set out above, we rule that Products A, B and C are not zero-rated basic groceries under section 1 of Part III of Schedule VI.
EXPLANATION
Generally, in accordance with section 165, 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 (or at the rate of 13% in Ontario; 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island) unless the supply is zero-rated. The tax rate in respect of a zero-rated supply is 0%. A zero-rated supply is a supply that is included in Schedule VI.
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), other than supplies listed in paragraphs (a) to (r) of that section.
The terms “food” and “beverage” are not defined in the ETA. The CRA’s approach is that these terms are to be read according to their ordinary meaning. As stated in GST/HST Memorandum 4.3, Basic Groceries (Memo 4.3), we consider a product to be a food or beverage if an average consumer would recognize and purchase the product as such in the ordinary course of buying basic groceries (i.e., food, beverages, and ingredients marketed for human consumption). This approach is based on the view that food and beverages are usually consumed by an average person 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 benefits related to performance or physique.
CRA publications GI-001, Products Commonly Described as Dietary Supplements and Memo 4.3 outline the criteria the CRA considers in determining whether a product is a food, beverage or ingredient for human consumption or a dietary supplement. The criteria includes a product's labelling, packaging/format, and marketing.
The following factors, as listed in GI-001, are criteria that help determine whether a particular product is a dietary supplement and not a basic grocery item:
- The label or marketing material refers to the product as a “dietary supplement” or “supplement”.
- The label or marketing material claims that the product has a therapeutic or preventive effect, enhances mental or physical performance, or enhances physique.
- The label or marketing material emphasizes a particular nutrient that is not commonly regarded as an ingredient to basic groceries; for example, whey protein isolate or chlorophyll.
- The product marketing may also emphasize the purity or source of the nutrient.
- The label or marketing material indicates a dosage size and how often the product should be taken. There may also be warnings advising certain people such as children or pregnant women not to take the product, or that the product is to be taken only as directed by a physician.
- The product has a Drug Identification Number (DIN), a Drug Identification Number Homeopathic Medicine (DIN-HM), or a Natural Products Number (NPN).
- The product lists the active or medicinal ingredients.
- The product is compared to other products that are not considered to be food, beverage or ingredient. For example, a product in powder form may be compared to a product in pill form.
- The label or marketing material focuses on the benefits to be derived from taking the product.
- The product is in a form not commonly associated with food, beverages or ingredients, for example, pills, capsules, tablets, gels, liquids in eye-dropper bottles, fibres, wafers, powders and concentrates.
- In sales catalogues or stores, the product is not placed with products that are commonly recognized as foods, beverages or ingredients. The product may be placed with non-prescription drugs.
Products that are consumed for the primary purpose of providing expected health benefits to the body do not fall within the meaning of a “food” or “beverage” simply because they are ingested into the body by eating or drinking. Such products fall outside of the zero-rating framework of Part III of Schedule VI.
Products A, B and C
Products A, B and C are labelled as protein powders and are marketed as […] by the manufacturer. The Products are described in comparison to other dietary supplements with a focus on the quality of the protein and amino acids. The Products are designed to supplement normal protein intake.
Furthermore, the Products are not ingested as food, but rather are consumed with food and beverages simply as a means to aid ingestion and absorption by the body.
As a result, the Products are not basic groceries but instead are dietary supplements and are therefore not zero-rated under section 1 of Part III 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 289-356-7396. 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,
Peter Pushkarna
Rulings Officer
Basic Groceries and Recaptured Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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