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.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 229977
Dear [Client]:
Subject: GST/HST ruling - Supply of canary seeds
Thank you for your correspondence of July 21, 2021, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to canary seeds. We apologize for the delay in this response.
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 facts as follows based on your correspondence, the Canadian Grain Commission’s website at grainscanada.gc.ca and the Canary Seed Development Commission of Saskatchewan’s website at canaryseed.ca:
1. The news release from the Canadian Grain Commission published on June 9, 2021, (canada.ca/en/grain-commission/news/2021/06/canary-seed-will-soon-become-an-official-grain.html) designated canary seed as an official grain under the Canada Grain Act effective August 1, 2021, and provided the following information:
- under the Canada Grain Act, the Canadian Grain Commission is responsible for establishing and maintaining Canada’s grain grading system;
- Canada accounts for 65% of global production and about 80% of total export of canary seed; and
- Saskatchewan accounts for over 95% of Canadian acreage and production and is the world’s leading producer and exporter of canary seed.
2. The scientific report from the Canadian Grain Commission published on February 1, 2021, (grainscanada.gc.ca/en/grain-research/scientific-reports/canary) provided the following information:
- traditionally, canary seeds (Phalaris canariensis L.) were used exclusively as a birdseed due to the presence of hair-like silica fibres, called trichomes, attached to the hulls. These early ‘hairy’ canary seeds were not suitable for human consumption because the small hairs contaminated the hulled whole kernels during dehulling and were deemed hazardous and potentially carcinogenic to human health;
- in the late 1990’s […] a canary seed breeder from the University of Saskatchewan’s Crop Development Center developed a hairless canary seed […] in which the trichomes were completely absent from the hull and glumes. The new ‘hairless’, or glabrous, species was not only easier to handle, but could also be safely consumed and utilized by the food industry as a cereal grain; and
- in 2015, Health Canada and the Food and Drug Administration gave GRAS (Generally Regarded as Safe) status to glabrous canary seeds and approved them as a novel food product.
3. The Canary Seed Development Commission of Saskatchewan (CSDCS) established in 2006 funds canary seed breeding and agronomic work.
4. The news release from the CSDCS published on January 6, 2022, (canaryseed.ca/2022-01-06-canary-seed-alpiste-for-human-food-now-available.html) provided the following information:
- with de-hulled canary seed becoming available to food processors and consumers, the CSDCS has launched a new consumer-facing website to provide nutritional information and promote the suppliers.
- canary seed for human use is being branded with its Spanish name, alpiste, and the website is alpistecanada.ca; and
- the human food market for canary seed is still in its infancy, but having companies interested and product available is a big step.
5. In page 6 of the newsletter from the CSDCS (Newsletter) - Summer 2022 Edition (canaryseed.ca/documents/Canary_Seed_News_Summer_2022.pdf) it is provided that most of the canary seed acreage is still seeded to the old non-glabrous varieties […] because they still have the best yields.
6. In page 2 of the Newsletter - Fall 2022 Edition (canaryseed.ca/documents/Canary_Seed_News_Fall_2022.pdf) it is provided that over the years, the CSDCS has expended considerable resources […] to facilitate this alternative market and that progress has been slow and the vast majority of canary seed is still for the birdseed market.
RULING REQUESTED
You would like to know if the supply of canary seeds (Phalaris canariensis L.) is zero-rated under section 2 of Part IV of Schedule VI.
RULING GIVEN
Based on the facts set out above, we rule that the supply of canary seeds (Phalaris canariensis L.) is not zero-rated under section 2 of Part IV of Schedule VI and subject to the GST/HST at the applicable rate.
EXPLANATION
Generally most supplies of goods and services that are made in Canada are taxable supplies subject to the GST/HST unless the supply is specifically identified as being an exempt supply (not subject to the GST/HST) or a zero-rated supply (subject to the GST/HST at a rate of 0%). Exempt supplies are listed in Schedule V while zero-rated supplies are listed in Schedule VI.
Section 2 of Part IV of Schedule VI provides, in part, that a supply of grains or seeds (Seeds) is zero-rated when all of the following conditions are met:
1. the Seeds are supplied in their natural state, treated for seeding purposes, or irradiated for storage purposes;
2. the Seeds are ordinarily used as, or to produce, food for human consumption or feed for farm livestock or poultry;
3. the Seeds are supplied in a quantity that is larger than the quantity that is ordinarily sold or offered for sale to consumers; and
4. the Seeds or mixtures of the Seeds are not packaged, prepared or sold for use as feed for wild birds or as pet food.
As stated in the Newsletters the market for human food products made from canary seeds is still in the development stage and the vast majority of canary seeds are used as a component of feed mixtures for pet birds which is excluded from the zero-rating provision of section 2 of Part IV of Schedule VI.
It is therefore our conclusion that the supply of canary seeds does not meet the zero-rating provision of section 2 of Part IV of Schedule VI. If sometime in the future, the use of canary seeds changes, we would be prepared to re-examine our position. Please note that the other conditions under section 2 of Part IV of Schedule VI must also be met for the sale of canary seed to be zero-rated.
DISCLAIMER
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 236-330-8126.
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.
Sincerely,
Sungjin Kim
Rulings Officer
Services and Intangibles Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate
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