CRA finds that insurance premiums were required to be bifurcated from lease payments to be GST-exempted

A customer of a car dealer would apply to an insurer for insurance and be issued the policy directly. However, the full up-front premium would be paid to the insurer by the car dealer, who would add the premium amount to the cost of the leased vehicle for purposes of computing the monthly lease payments payable by the customer under the lease agreement.

CRA noted that the lease agreement was the only governing agreement between the dealer and the customer and that, generally, where the dealer and customer entered into a lease agreement, the entire monthly lease payment would be consideration for the dealer's single taxable supply of the vehicle by way of lease to the customer.

Under an alternative situation, where the insurance premiums were charged separately to the customer by an agent for the insurer, those premiums were exempted.

Neal Armstrong. Summary of 17 May 2022 GST/HST Ruling 209546 under s. 123(1) – supply.