1 June 2004 GST/HST Interpretation 48075 - Application of GST/HST to [Imported Products Marketed as Supplements to a Weight Loss Program]

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

Dear XXXXX:

Thank you for your letters XXXXX, with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the following XXXXX products: XXXXX (product A), XXXXX (product B) and XXXXX (product C).

Statement of Facts

1. Your client intends on importing the products into Canada and selling to both retailers and consumers.

2. Product A is a powder and is supplied in a XXXXX gram container.

3. Product A label states: XXXXX.

4. Product A directions for consumption are: XXXXX

5. Product A directions for preparation are: XXXXX

6. Product A Ingredients per 100g are: XXXXX

7. Product B is a powder and is supplied in a XXXXX gram container.

8. Product B label states: XXXXX

9. Product B directions for consumption are: XXXXX

10. Product B directions for preparation are: XXXXX

11. Product B Ingredients per 100g are: XXXXX

12. Product C is a powder and is supplied in a XXXXX gram container.

13. Product C label states: XXXXX

14. Product C directions for consumption are: XXXXX

15. Product C directions for preparation are: XXXXX

16. Product C Ingredients per 100g are: XXXXX

17. Products B and C labels state: XXXXX.

18. The products are not labelled as Meal replacements or Nutritional Supplements.

19. Your client has indicated that the products are XXXXX

20. The products are available at XXXXX. They can be sold individually or as part of a program that includes other components that are provided at the XXXXX.

Ruling Requested

What is the tax status of the products?

Ruling Given

Based on the facts set out above, we rule that products A, B and C are taxable at 7% GST or 15% HST, as applicable, pursuant to section 165 of 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 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% GST or 15% HST, as applicable. 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 or beverages for human consumption 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.

The terms "food" and "beverage" are not defined in the ETA. However, the CRA's 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 such in the ordinary course of buying 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 as an ingredient to a food or beverage simply because it is ingested in this manner.

Pursuant to GST/HST Policy Statement P-240, Application of GST/HST to Products Commonly Described as "Dietary Supplements", if a product identifies itself as a 'supplement', 'dietary supplement', 'food supplement' or other type of similar supplement, 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.

The CRA considers such things as labelling, packaging and marketing when determining a product's tax status. As previously stated, products A, B and C, which are marketed as supplements to a weight loss program, are in a powdered format and must be mixed with a food or beverage in order to be consumed. It is the CRA's position that products A, B and C are not considered to be food, beverages or ingredients and are therefore taxable at 7% GST or 15% HST, as applicable.

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,

Nicole Thomas, CMA
Goods Unit
General Operations & Border Issues Division
Excise and GST/HST Rulings Directorate

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