10 July 1998 GST/HST Interpretation HQR0001117 - Temporary Importation of a Motorcycle

                                                                        GST/HST Rulings and Interpretations
  Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Road
Vanier, Ontario
XXXXX                                                                                 K1A 0L5

Dear XXXXX

A copy of your letter of March 3, 1998, and a copy of the response from our Customs and Trade Administration Branch concerning the application of the Goods and Services Tax/Harmonized Sales Tax GST/HST to a motorcycle temporarily imported was forwarded to our office for consideration.

Statement of Facts

My understanding of the facts is as follows.

XXXXX is a resident company located in XXXXX Canada and is registered for GST/HST purposes.

XXXXX sells conversion kits for motorcycles, and installs them at the request of the buyer.

XXXXX has imported a motorcycle which is the property of a non-resident. It will convert the motorcycle from a two wheeler to a three-wheeler by installing a conversion kit.

After the conversion is completed, the motorcycle is exported to x the U.S.A.

Interpretation Requested

In relation to the application of the GST/HST, your letter raises two important issues:

first, the application of the GST/HST to the goods imported February 19, 1998, and, second, the general tax treatment of goods imported for further processing and export.

Interpretation Given

Based on the information set out above, the following interpretation is provided:

1. All goods imported into Canada are taxable unless specifically relieved under section 213 of the Excise Tax Act (the Act). Goods relieved of tax under section 213 of the Act are included in Schedule VII to the Act. Since motorcycles are not listed among the goods for which tax relief is provided, they are taxable at time of importation.

2. There are proposed legislative provisions whereby, exporters of processing services may obtain relief from payment of the GST/HST imposed under Division III of the Act in respect of goods and materials imported for processing and subsequent export.

The Exporters of Processing Services (EOPS) Program allows manufacturing service companies, who are registered for the GST/HST, to import goods owned by non-residents for further processing, relieved of GST/HST at time of importation. Proposed changes to the Non-Taxable Imported Goods (GST) Regulations will prescribe the circumstances which must exist in order for the imported goods to qualify for relief of GST/HST.

Under the program GST/HST relief will apply to importations of:

(i) goods to be processed in Canada for a non-resident and subsequently exported without being used in Canada for any purpose,

(ii) goods to be used in, wrought into or attached to goods processed in Canada for a non-resident and subsequently exported without being used in Canada for any purpose, or

(iii) materials (other than fuel, lubricants or plant equipment) directly consumed or expended in the processing in Canada for a non-resident of goods which are subsequently exported without being used in Canada for any purpose.

The program does not provide relief from payment of the tax where the importer has ownership interest in the imported goods or the processed products, or if the GST registered person is closely related to the non-resident person on whose behalf the processing is being done. It appears that your client may not be able to meet the requirements of the program with respect to the question of ownership interest, because your client owns and sells conversion kits to motorcycle owners.

More details about the EOPS program are contained in GST Technical Information Bulletin B-069 Goods and Services Tax Treatment of Imports By Exporters of Processing Services (copy attached).

The foregoing comments represent our general views with respect to the proposed amendments to the Excise Tax Act as they relate to the subject matter of your letter. Any change to the wording of these proposed amendments or any future proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Department with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

If XXXXX would like to determine if they qualify for participation in the EOPS program they should contact their local Tax Services Office. More information is available from XXXXX may also write to XXXXX at XXXXX[.]

Yours truly,

Roy McKain
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate

Encl.

Legislative References:           Section 169(2), Section 212 and 213 of the Excise Tax Act
Schedule VII of the Excise Tax Act
Proposed Amendment to the Non-Taxable Imported Goods (GST) Regulations