Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 187397
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Language training
Thank you for your letter of August 24, 2017, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to your supplies of educational services. We apologize for the delay in responding.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We have attempted to contact you on several occasions without success to obtain additional information and clarify the facts. In the interest of providing you with our decision, the following ruling is based on the facts as described below which were provided in your letter of August 24, 2017 and the two additional documents you submitted to us, your telephone conversations with our field officer and my telephone conversation with you on March 13, 2018.
1. […](the Corporation) is not registered for GST/HST purposes.
2. The Corporation is not a school authority, a vocational school, a public college or a university as defined in the ETA.
3. The Corporation does not currently charge GST/HST on its supplies.
4. The Corporation is an English language academy that offers educational training and practice to help students learn English as a second language, as well as, the necessary test skills and strategies they need to succeed in further education.
5. The Corporation supplies services of instruction in a preparation course to prepare individuals to write the International English Language Testing System (IELTS) test.
6. In order to be accepted into the IELTS preparation course offered by the Corporation, individuals are required to have either a certificate […][description of prerequisite] from a language institution or a passing grade on the Corporation’s entrance test.
7. The Corporation submitted two documents, a […] (syllabus and agreement) and a […] (invoice) for the IELTS Program.
8. The syllabus and agreement provides the following course introduction:
[…][Information quoted from the syllabus and agreement describing the Corporation’s IELTS preparation course]
9. The syllabus and agreement provides the following course description:
[…][Information from the syllabus and agreement describing the Corporation’s IELTS preparation course]
10. The syllabus and agreement provides the following as the Learning Objectives of the IELTS preparation course:
[…][Information quoted from the syllabus and agreement describing the Corporation’s IELTS preparation course]
11. There is no grade distribution; however, daily attendance and daily homework completion is critical for the individuals to improve their IELTS band scores. There are no mid-terms or final exams as individuals are evaluated on a weekly basis. Individuals are expected to actively participate in class discussion and work collaboratively with others.
RULING REQUESTED
You would like to know whether your supplies of services of instruction in a preparation course for the IELTS test are exempt supplies under the ETA, and whether you are required to register for GST/HST purposes.
RULING GIVEN
Based on the facts set out above, the Corporation’s supplies of the service of instructing individuals in the preparation course for the IELTS test are taxable supplies. However, the Corporation would only be required to charge, collect and remit the GST/HST on its taxable supplies if it is registered or required to be registered for the GST/HST.
Information on whether the Corporation is required to register for GST/HST purposes has been provided below under the heading “ADDITIONAL INFORMATION.”
EXPLANATION
Generally, most supplies of property and services made in Canada are subject to the GST/HST, unless they are specifically identified as being exempt. Exempt supplies are listed in Schedule V and are not subject to the GST/HST.
Section 11 of Part III of Schedule V exempts “a supply of a service of instructing individuals in, or administering examinations in respect of, language courses that form part of a program of second-language instruction in either English or French, if the supply is made by a school authority, a vocational school, a public college or a university or in the course of a business established and operated primarily to provide instruction in languages.”
In order for a supply of a service of instruction to be exempt under section 11 of Part III of Schedule V, the service of instruction must be in a language course, and that course must form part of a program of second-language instruction in either English or French.
IELTS preparation courses generally focus on preparing the individual to write the IELTS test. Generally, the preparation course does not qualify as a language course and the service of instruction is not instruction in a second-language. Therefore, the service of instructing individuals in the preparation course for the IELTS test is not a language course that forms part of a program of second-language instruction.
As there are no other provisions in the ETA to exempt supplies of a service of instructing individuals in a preparation course for the IELTS test under the circumstances described above, your supplies of instructing individuals in the preparation course for the IELTS test are taxable supplies.
The ETA requires that every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is required to register for GST/HST purposes except where the person is a small supplier.
The ETA defines a “commercial activity” of a person to include a business carried on by the person, or an adventure or concern of the person in the nature of trade, except to the extent it involves the making of exempt supplies by the person. It also includes making a supply (other than an exempt supply) of real property, including anything done by the person in the course of or in connection with the making of the supply.
In general, a person is a “small supplier” during any particular calendar quarter and the following month if the total value of the consideration for world-wide taxable supplies including zero-rated supplies (other than supplies of financial services, sales of capital property, and goodwill attributable to the sale of a business) made by the person, or an associate of the person at the beginning of the particular calendar quarter, that became due, or was paid without becoming due, in the previous four calendar quarters does not exceed $30,000.
In the case of a person who is required to be registered for GST/HST purposes, the person is considered a “registrant” under the ETA whether or not the person actually registers. Therefore, in the case of mandatory registration, the person's effective date of registration will correspond to the date from which the person became a “registrant” under the ETA. The person’s effective date of registration will be the day that the person first makes a taxable supply in Canada otherwise than as a small supplier. As a registrant at that time, the person is subject to the requirements and entitlements under the ETA.
The preceding information is provided in more detail in Guide RC4022 - General Information for GST/HST Registrants, which may be accessed on our website at www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4022/general-information-gst-hst-registrants.html.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the CRA is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-7946. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
K. Bennett
Aboriginal Affairs and Educational Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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