A developer who applies for a development permit or subdivision approval may be required by the municipality to pay a levy, or to construct, or pay for the construction of, municipal improvements (which potentially may be in excess of those required to support the particular contemplated development), with such improvements becoming municipal property. In the excess capacity situation, fees collected from subsequent developers generally are used by the municipality to reimburse this developer's costs.
The development levy will be considered to be consideration for an exempt supply of a permit or similar right under Sched. V, Part VI, s. 20(c). Although the supply of the construction services by the developer will be considered to be a taxable supply, no GST or HST will be payable by the municipality if this supply is made for no consideration. Fees collected by the municipality from subsequent developers would generally become consideration for a taxable supply when the fees are used to reimburse the developer.