CRA treats construction services provided in exchange for a development permit as being made for nil consideration for GST/HST purposes

A subdivision developer who pays a development levy of a municipality will be considered to have made an exempt supply for HST/GST purposes of cash in consideration for an exempt municipal service.  However, its provision of municipal improvements such as roads generally will be treated as the making of a taxable supply for nil consideration rather than in consideration for the (presumably valuable) permit, so that no GST or HST is payable by the municipality.

Although this result makes policy sense, it is somewhat at odds with the general tax treatment of barter exchanges as occurring at the fair market value of the exchanged property or services (see for example, Bernick).

Neal Armstrong.  Summary of 31 July 2012 Interpretation Case No. 103548 under ETA – s. 153(1) and Sched. V, Part VI, s. 20.