18 February 1997 GST/HST Ruling HQR0000019 - Application of the GST to the Supply of a Meal Replacement

Dear XXXXX

Thank you for your letter of August 21, 1996 (with attachments) concerning the application of the Goods and Services Tax (GST) to the fact scenario described below. We apologize for the delay in responding to your letter.

Our understanding of the facts is as follows:

Statement of Facts

XXXXX is a Canadian company engaged in the importation, marketing and distribution of a product known as the XXXXX[.] This product has been marketed and sold as a meal replacement and has previously been zero-rated for GST purposes.

Recently, the regulations to the Food and Drug Act were amended to create a new category of food products called the "balanced nutritional supplement" category. This new category is defined in the regulations as "a food sold or represented as a supplement to a diet that may be inadequate in energy and essential nutrients". The category of "meal replacement" is defined as "a formulated food that, by itself, can replace one or more daily meals". The main differences between the "meal replacement" category and the "balanced nutritional supplement" category are the following:

•   a meal replacement must provide a minimum of 225 kcal while a nutritional supplement must provide a minimum of 150 kcal;

•   a meal replacement has both minimum and maximum fat content requirements, whereas there are no minimum fat content requirements for a nutritional supplement; and

•   a meal replacement has minimum and maximum content requirements for listed vitamins and minerals; a nutritional supplement has similar content requirements but the minimum and maximum amounts are proportional to the caloric content of the supplement.

The Regulatory Analysis Impact Statement to the new regulations states that these new regulations only apply to "balanced" nutritional supplements, which means nutritionally complete supplements that include both macro and micro-nutrients balanced in relation to energy.

XXXXX intends to modify the composition of its XXXXX products in order to qualify them as balanced nutritional supplements under these regulations and in order to be able to market them as low-fat products. The newly formulated bars will have essentially the same composition as before, except for a lower fat content. XXXXX will market the product in much the same way as before, except that it will be marketed as a low fat product under the new nutritional supplement category.

Your client XXXXX is asking for a ruling as to whether the newly formulated bars will be zero-rated for GST purposes.

Ruling Given

Based on the facts set out above, we rule that the newly formulated XXXXX qualifies as a zero-rated basic grocery item under section 1 of Part III of Schedule VI to the Excise Tax Act.

This ruling is subject to the general limitations and qualifications outlined in the GST Memoranda Series (1.4). 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, and that you have fully described all necessary facts and transactions for which you requested a ruling.

Yours truly,

Gregory Smart
Policy Officer
GST Rulings and Interpretations

Legal References:

Authority:

Reference:

b.c.c.:   NCS Subject Code(s) - R

b.c.c.:   District Chief, Audit

b.c.c.:   XXXXX