31 March 1999 GST/HST Ruling HQR0001304 - Vocational Schools

Thank you for your letter of July 10, 1998 (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of the XXXXX[.] We apologize for the delay in responding.

Statement of Facts

Our understanding of the facts, the transaction(s), and the purpose of the transaction(s) is as follows:

1. XXXXX is a sole proprietorship owned by XXXXX[.]

2. XXXXX  is not governed by XXXXX  respecting vocational schools.

3. XXXXX hereinafter "the Programs" XXXXX to XXXXX prepares students to write the XXXXX  while the XXXXX  XXXXX prepares participants to write the XXXXX[.] The Programs offered by XXXXX  are not offered on a pass/fail basis.

5. The courses are offered at various locations in Canada as well as at the XXXXX

6. The course registration fees include all textbooks and materials, as well as an XXXXX study binder. In addition, for the course in XXXXX  the fees include all meals and accommodation. The fees do not include the XXXXX  examination fee or travel expenses.

Ruling Requested

Should XXXXX  charge GST on its Programs, considering that XXXXX  and XXXXX  have been treating similar programs as GST exempt commencing in 1997?

Ruling Given

Based on the facts set out above, we rule that:

1. Supplies of the Programs at course locations within Canada are taxable supplies that are not exempted under section 8 of Part III of Schedule V to the ETA, and are therefore subject to the GST/HST.

2. Supplies of the Programs at course locations in XXXXX are deemed to be supplies made outside Canada, and are therefore not subject to the GST/HST.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, a copy of which is enclosed for your reference. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

All supplies made in Canada are subject to GST/HST unless they are otherwise exempted by a specific provision of the Excise Tax Act (hereinafter the "ETA").

Section 8 of Part III of Schedule V to the ETA exempts the service of instructing in courses leading to a certificate or licence that attests to the competence of individuals to practice a trade or vocation, where the service is provided by a vocational school and either:

(i) the vocational school is governed by provincial legislation respecting vocational schools OR

(ii) the service is provided by a vocational school and the certificate or licence is prescribed by federal or provincial regulation OR

(iii) the supplier is a non-profit organization or a public institution.

It is the position of the Department that the XXXXX  was established and is operated primarily to provide students with instruction in courses that develop or enhance students' occupational skills. As such, it is a "XXXXX or the purposes of the ETA. Therefore, its courses may be exempt from the GST/HST under section 8 of Part III of Schedule V to the ETA if the courses lead to certificates, diplomas or licenses that attest to the competence of individuals to practice or perform a trade or vocation, and one of the following three conditions is met:

(i) the XXXXX is governed by XXXXX  legislation respecting vocational schools OR

(ii) the service is provided by a vocational school and the certificate or license is prescribed by federal or provincial regulation OR

(iii) the supplier is a non-profit organization or a public institution.

It is the position of the Department that the Programs offered by XXXXX in Canada are not exempt of GST pursuant to section 8 of Part III of Schedule V to the ETA, for two reasons. First, the courses offered by the XXXXX do not lead to certificates, diplomas or licenses that attest to the competence of individuals to practice a trade or vocation. Second, none of the three criteria noted above are satisfied, namely:

(i) the XXXXX is not governed by provincial legislation respecting vocational schools;

(ii) neither the services nor the certificates issued by XXXXX are prescribed by federal or provincial legislation; and

(iii) XXXXX  is neither a non-profit organization or a public institution.

More specifically, it is the Department's position that the XXXXX consist of seminars and workshops that do not lead to certificates, diplomas or licences that attest to the competence of individuals to practice a trade or vocation since they are not offered on a pass/fail basis. The participants of the XXXXX seminars and workshops are not required to demonstrate, either by passing an examination or through critical evaluation of a project or product, that they have acquired skills that make them competent to practice a trade or vocation. There is no possibility that a participant could "fail" the Programs and thereby be prevented from writing the XXXXX[.]  If participants are granted a certificate, the certificate can only attest to their attendance, rather than their competency to practice as a XXXXX[.] Consequently, the Programs are taxable supplies that are not exempted by section 8 of Part III to Schedule V to the ETA.

On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%. To the extent that the Programs are provided in one of the participating provinces, they are subject to HST at the rate of taxable supplies (which are not zero-rated), and tax must be collected at the harmonized tax rate of 15%. Where the Programs are offered in a non-participating province, the GST rate of 7% applies.

Where a service such as instructing individuals in the XXXXX  is performed wholly in XXXXX it is deemed to be made outside Canada pursuant to paragraph 142(2)(g) of the ETA, and the supplier is therefore not required to collect the GST/HST.

At this time, the Department cannot comment on the current tax treatment of similar supplies of XXXXX offered by other educational institutions. However, we have taken this matter under advisement, and thank you for bringing it to our attention.

Should you have any further questions or require clarification in regards to the above-noted issues, please do not hesitate to contact either Ken Syer at (613) 954-7957 or me at (613) 952-4157.

Yours truly,

Kristine A. Allen, LL.B.
Educational Services and Indians Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate