23 August 2006 GST/HST Interpretation 82131 - Rebill invoices

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 request XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX (the product).

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

Effective July 1, 2006, the rate of the GST has been reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST/HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to Reduction in the Rate of the GST/HST - Questions and Answers (http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html) on the CRA Web site.

Statement of Facts

Our understanding of the facts is as follows:

1. The Product is packaged in XXXXX-gram packages that come in cartons of XXXXX packages.

2. The ingredients of the Product are: granola XXXXX.

3. The labelling on cartons containing the Product indicates that the carton XXXXX.

4. The Product is not sold primarily as a breakfast cereal.

Ruling Requested

You would like to know the GST/HST status of supplies of the Product.

Ruling Given

Based on the facts set out above, we rule that supplies of the Product are taxable at 6% GST, or 14% HST pursuant to section 165.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

Generally, every recipient of a taxable supply made in Canada shall pay tax calculated at the rate of 6% on the value of the consideration for the supply (14% in the participating provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador) unless the supply is zero-rated, pursuant to subsection 165(3). The tax rate in respect of a zero-rated supply is 0%, where a zero-rated supply is a supply that is included in Schedule VI.

Under Part III of Schedule VI, certain supplies of basic groceries are zero-rated. 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 mixed with or used in the preparation of such food or beverages, other than supplies included in paragraphs (a) to (r) of that section.

Under paragraph 1(h) of Part III of Schedule VI, the following products are excluded from zero-rating:

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

Granola bars and other granola products (other than granola breakfast cereals) are taxable. Granola means a mixture of cereals (e.g., rolled oats, rice) and honey and/or syrup as the main ingredients, and may include nuts and fruit. The ingredients in granola are not processed to a great extent, and the distinct character of each ingredient is retained. The mixture may be sold in loose form or pressed, for example, into bars. Granola bars may have a chocolate or sweetened coating.

As the Product is considered to be a granola product that is not sold primarily as a breakfast cereal, it falls under the exclusion pursuant to paragraph 1(h) of Part III of Schedule VI, and is taxable at 6% GST or 14% HST, as applicable.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-9585.

Yours truly,

Ben Boboski
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2006/08/23 — RITS 82134 — Application of GST/HST to [Snackfood]