General
Sch. VI, Part III, s. 1
1. The supply of basic groceries, which includes most supplies of food and beverages marketed for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of such food or beverages), is zero-rated. However, certain categories of foodstuffs, for example, carbonated beverages, candies and confectionery, and snack foods are taxable. If a product's tax status is in doubt, the CRA will consider the manner in which the product is displayed, labelled, packaged, invoiced and advertised to determine its tax status.
Food and beverages in general
2. The terms "food" and "beverage" are not defined in the Act. However, the CRA considers a product to be a food or beverage if an average consumer would recognize and purchase the product as such in the ordinary course of buying basic groceries. Consumers usually consume food and beverages to sustain or maintain life, to allay hunger or thirst, or for enjoyment rather than for therapeutic or preventative effects (e.g., to correct actual or perceived health problems) or to achieve specific beneficial benefits related to performance or physique.
3. The CRA's approach is based on the views of an "average consumer". As a result, individual preferences for, or dislikes of, certain products would not alter the general perception that a product was, or was not, a food or beverage. Similarly, products that meet the special dietary needs of certain segments of the population, such as those with restricted or special purpose diets, high performance athletes and dieters may not necessarily be viewed by the average consumer as food or beverages. These types of products are commonly referred to as dietary supplements. Please see paragraphs 148 to 159 for a discussion of dietary supplements.
Ingredients
4. The term "ingredient" is not defined in the Act. Generally, it is the view of the CRA that an average consumer would consider a product to be an ingredient if it added to the flavour, texture or appearance of the final product; that is, if it was integral to the final product. Moreover, to be considered an ingredient, the final product must, in and of itself, be a food or beverage. A product that is marketed for its beneficial effects and that is added to a food or beverage simply as a way to consume it would not be considered an ingredient.
