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: 246662
Business Number: […]
Dear [Client]:
Subject: GST/HST Ruling - Application of GST/HST on the supply of […][bites]
Thank you for your correspondence of November 2, 2023, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) on the supply of […][bites] (the Product). 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
Our understanding of the facts are as follows:
1. The Product is sold at the retail level by […] (the Retailer).
2. The Retailer is a registrant for GST/HST purposes.
3. The Product is sold in a [#]g bag containing greater than [#] items in each bag.
4. The item has an exterior hard chocolate shell with a […][filling].
5. Each item comes individually wrapped in foil.
6. The Product is manufactured by […] (the Manufacturer).
7. The ingredients, as listed on the Product packaging, are as follows:
Dark and milk chocolates […][other ingredients].
8. The Retailer has indicated that the Product is sold alongside confectionary items and cookies.
9. The Manufacturer is generally in the business of manufacturing chocolate products.
RULING REQUESTED
You would like to know whether the supply of the Product is zero-rated for GST/HST purposes.
RULING GIVEN
Based on the facts set out above, we rule that the supply of the Product is not zero-rated and is subject to GST/HST at the applicable rate.
EXPLANATION
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) unless an exclusion set out in paragraph 1(a) through 1(r) of that section applies.
We set out below the Canada Revenue Agency’s (CRA) position concerning the application of the exclusions to snacks that are sweetened and are sold in the form of mini balls, bites, chunks or other similar forms. Such products may be subject to the following exclusionary paragraphs:
- candies, confectionery that may be classed as candy, or any goods sold as candies, such as candy floss, chewing gum and chocolate, whether naturally or artificially sweetened, and including fruits, seeds, nuts and popcorn when they are coated or treated with candy, chocolate, honey, molasses, sugar, syrup or artificial sweeteners (paragraph (e));
- granola products, but not including any product that is sold primarily as a breakfast cereal (paragraph (h));
- fruit bars, rolls or drops or similar fruit-based snack foods (paragraph (l)); or
- cakes, muffins, pies, pastries, tarts, cookies, doughnuts, brownies, croissants with sweetened filling or coating, or similar products where
(i) they are prepackaged for sale to consumers in quantities of less than six items each of which is a single serving, or
(ii) they are not prepackaged for sale to consumers and are sold as single servings in quantities of less than six,
but not including bread products, such as bagels, English muffins, croissants or bread rolls, without sweetened filling or coating (paragraph (m)).
It should be noted that snacks that are unsweetened but sold in the form of mini bites, balls or other similar forms may be subject to the exclusion in paragraph (f) as a similar snack food to chips, crisps, puffs, curls or sticks where the snacks are salty or savoury.
Paragraph (e)
Paragraph 1(e) excludes from zero-rating candy, confectionery that may be classed as candy, or any goods sold as candies, such as candy floss, chewing gum and chocolate, whether naturally or artificially sweetened, including fruits, seeds, nuts and popcorn when they are coated or treated with candy, chocolate, honey, molasses, sugar, syrup or artificial sweeteners.
This exclusion is intended to apply quite broadly as it applies not only to candy, but also to supplies of confectionery which may be classed as candy and supplies of goods which are sold as candy. Furthermore, it applies whether the product at issue is artificially or naturally sweetened. Thus, the exclusion is intended to apply not only to supplies of candy but supplies of anything that is likely to compete with candy in the marketplace. Accordingly, if the main ingredient is a form of sugar or chocolate, this is a strong indicator that the item is a candy or confectionery as it will likely compete with other candies or confectionery. However, certain foods with sugar or chocolate as a main ingredient may not by their nature fall within this paragraph. For example, some Indian sweets may have sugar as a main ingredient and have the appearance similar to bites, balls or chunks, however, the intention of these items is to be consumed similar to types of sweetened baked goods and would not generally be classed as a candy or confectionery. With such items, the marketing of the item can give a strong indication of the nature of the product.
It is CRA’s position that where sugar or chocolate are the main ingredient, the product will ordinarily fall within paragraph (e) unless the nature of the product indicates that it should not be classed as a candy, confectionery that may be classed as candy or goods sold as candies.
Paragraph (m)
Paragraph 1(m) excludes supplies of cakes, muffins, pies, pastries, tarts, cookies, doughnuts, brownies, croissants with sweetened filling or coating, or similar products where:
(i) they are packaged for sale to consumers in quantities of less than six items each of which is a single serving, or
(ii) they are not prepackaged for sale to consumers and are sold as single servings in quantities of less than six,
but not including bread products, such as bagels, English muffins, croissants or bread rolls, without sweetened filling or coating.
Paragraph (m) generally applies to items referred to as sweetened baked goods. In paragraph (m), the phrase “or similar products” could include the types of sweetened mini bites, balls, chunks and other similar items that do not fall within paragraphs (e), (h) or (l). This can apply to items where fruit, sugar and chocolate are not significant ingredients. They may be ingredients however not a significant ingredient.
Some other factors to also consider in determining the GST/HST treatment of bites, balls, chunks or similar products include the product labelling, packaging and marketing within a store and/or on a website. With regards to marketing, it is important to consider whether certain marketing is related to the flavour of a particular item as opposed to characterizing the product itself. […] Although the flavour of the product may be described in paragraph 1(m), it is important to recognize that this is simply the flavour of the product that is being promoted through marketing and not the nature of the product. Such products may fall within paragraphs (e), (g) or (l) based on the nature of the product rather than falling within paragraph (m).
With respect to the Product under consideration, although the Product contains [filling], the [filling] is simply a flavour of the Product and does not reflect the true nature of the Product. As the main ingredient in the Product is chocolate and the Product is consumed similar to a chocolate, and is packaged, presented and promoted as a chocolate, it is our opinion that the Product is a confectionary item. Therefore, the supply of the Product would be excluded from zero-rating under paragraph 1(e) of Part III of Schedule VI and subject to GST/HST at the applicable rate.
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 interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-429-1696. 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 or by fax to 1-418-566-0319.
Sincerely,
Siraj Patel
Senior Rulings Officer
Strategic and Emerging Issues Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate
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