Date: 19990601
Docket: 97-2618-GST-I
BETWEEN:
CENTRE PROVINCIAL DE RESSOURCES PÉDAGOGIQUES,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Bowman, J.T.C.C.
[1] The appellant, the Centre provincial de ressources
pédagogiques (“the CPRP”), is appealing a
Goods and Services Tax (“GST”) assessment made by the
Minister of National Revenue for the period from August 1, 1992,
to July 31, 1996.
[2] The issue is whether, as the Minister argued, the CPRP is
an integral part of the Université Sainte-Anne,
a charity, or whether it is a body of the Department of Education
and Culture of Nova Scotia.
[3] The appellant claims to be a body of the Department
because its services are being loaned to the Department by the
Université Sainte-Anne, because it is under the
Department’s jurisdiction and because it receives 100
percent of its funding from the Department. For that reason, the
appellant argued that it is entitled to be exempt from the
GST.
[4] Before deciding this issue, it is necessary to summarize
the provisions of the Excise Tax Act dealing with the
taxation of public sector bodies and of charities.
[5] Public sector bodies, including charities, normally make
exempt supplies covered by Schedule V to the Act. However, such
bodies—which include the provincial and federal
governments, universities, charities and
municipalities—must register and collect the GST on the
supplies they make in the course of their commercial activities.
Moreover, only the supplies listed in Part VI of
Schedule V to the Act are exempt from the GST. It follows
that, if all the supplies produced by a public sector body are
exempt, no input tax credit can be claimed.
[6] In Reference Re G.S.T., [1992] 2 S.C.R. 445, Lamer
C.J. stated the following at pages 456-57:
Provincial governments are not liable to pay tax on their
purchases. However, a number of subordinate entities created by
the provincial governments such as municipalities, universities,
public colleges, public hospitals, schools and school
authorities, for convenience referred to as the “MUSH
sector”, are liable to pay the tax.
The GST is designed to be a tax on consumption. To this end,
the GST Act contemplates three classes of goods and services.
Taxable supplies attract the tax of seven percent each time they
are sold. To the extent that the purchaser of a taxable supply
uses that good or service in the production of other taxable
supplies, it is entitled to an “input tax credit” and
can recover the tax it has paid from the government. The MUSH
sector is entitled to claim input tax credits to the extent that
its purchases are used in making taxable supplies, and it is
eligible for a special rebate of a portion of the tax paid on
other purchases.
By definition, to the extent that taxable supplies are not
used by the purchaser to produce other taxable supplies, they are
consumed by the purchaser. To this extent, the purchaser cannot
recapture the tax already paid through the input tax credit
mechanism. Hence, the GST is collected and refunded down through
each stage of the production process to the ultimate consumption
of a taxable supply, at which stage the tax paid is not
recoverable by the purchaser.
Exempt supplies and zero-rated supplies do not attract any tax
from the ultimate consumer. However, in respect of exempt
supplies, the vendor, while paying the GST on purchases, is not
entitled to an input tax credit. In consequence, in the case of
exempt supplies GST is paid to the federal government at the
penultimate stage in the production chain rather than by the
ultimate consumer. In principle, zero-rated supplies attract the
GST in the same way as any other taxable supply as they move
through the production chain to the ultimate consumer. However,
the consumer pays a tax set at “0 %”, and suppliers
are entitled to the input tax credit, so that no net revenue is
raised for the federal government at any stage in the production
chain by the production and sale of these goods.
[7] This passage provides a very good summary of how the Act
works. In the case at bar, the Minister denied the claim for
input tax credits on the ground that the appellant did not
acquire the goods and services in question in the course of its
commercial activities. He relied on Part VI of Schedule V to the
Act, which lists all the exempt goods and services that public
sector bodies supply. He concluded that the goods and services
were acquired by the appellant in the course of activities
covered by section 2 of Part VI of Schedule V to the Act.
[8] It is important to note that, in the course of their
activities, public sector bodies often acquire goods and services
on which the GST is collected. It follows that, if they do not
make a taxable supply, the GST paid cannot be recaptured through
the input tax credit mechanism. To remedy this absurd result, a
special rebate is provided for in section 259 of the Act. A
prescribed percentage of 67 percent for universities is set
out in section 5 of the Public Service Body Rebate (GST)
Regulations.
[9] I return now to the question posed at the beginning of
these reasons: is the appellant an integral part of the
Université Sainte-Anne or rather of the Department of
Education and Culture of Nova Scotia?
[10] I am satisfied that the appellant is part of the
Université Sainte-Anne, which is a charity under
subsection 123(1) of the Act.
[11] There have been a number of agreements between that
university and Her Majesty the Queen in right of the province of
Nova Scotia. I will cite a few typical provisions from one of
those agreements:
This Agreement dated the 7th day of July, A.D. 1988
BETWEEN:
HER MAJESTY THE QUEEN in the Right of the Province of
Nova Scotia, represented by the Minister of Education,
(hereinafter referred to as the “Minister”),
OF THE FIRST PART
- and –
UNIVERSITÉ SAINTE-ANNE, a body corporate
pursuant to Chapter 106 of the Acts of 1977 (hereinafter referred
to as the “Université”)
OF THE SECOND PART
WHEREAS the Université has been carrying on a
project financed through the Secretary of State known as The
Centre Provincial de Ressources Pédagogiques (hereinafter
referred to as the “C.P.R.P.”);
AND WHEREAS the C.P.R.P. provides essential services in
the French language to the public school system including a
lending library, evaluation material, films and other materials
and services;
AND WHEREAS the Minister is desirous that the services
of the C.P.R.P. should continue;
AND WHEREAS the Université has agreed that
C.P.R.P. should work for the Minister in the area of French
curriculum development and implementation;
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in
consideration of the mutual covenants and agreements herein
contained the Parties hereto covenant and agree with each as
follows:
1. The C.P.R.P. will serve the following functions:
(a) a lending library for francophone and immersion
schools,
(b) development and implementation of support materials for
francophone and immersion schools, and
(c) in-service of new materials for francophone and immersion
schools.
2. The C.P.R.P. shall carry out the duties under the direction
of the Curriculum Director of French Language Programs.
3. The financial administration of the C.P.R.P. shall continue
to be the responsibility of the Université.
4. (1) The Université shall submit to the Minister for
his approval a budget of the costs, salaries and benefits
required for the C.P.R.P. project.
(2) The Université shall continue payments to the
C.P.R.P. of its regular costs, salaries and benefits.
(3) The Minister shall reimburse the Université for the
budget pursuant to subsection (1) in twelve (12) monthly payments
per year.
[12] I acknowledge that the project carried out by the
appellant was fully financed by the province. However, this does
not mean that the appellant ceased to be an integral part of the
university or became a body of the province. In the agreement
cited above and the subsequent agreements, the appellant is
treated as a body of the university.
[13] For this reason, I have concluded that the appellant is
not entitled to be exempt from the GST or to receive the input
tax credit. However, it is entitled to the rebate provided for in
section 259 of the Act and in the Public Service Body Rebate
(GST) Regulations.
[14] The appeal is dismissed.
Signed at Ottawa, Canada, this 1st day of June 1999.
“D.G.H. Bowman”
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 29th day of March
2000.
Erich Klein, Revisor
Email this Content