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
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 158099
Dear [Client]:
Subject: GST/HST Ruling
Application of the GST/HST to core charges
Thank you for your fax of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to core charges.
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
STATEMENT OF FACTS
We understand the facts are as follows:
1. You, an individual who is not registered and is not required to be registered for the GST/HST, purchased a remanufactured break calliper from ([…][the Company]).
2. You paid the HST in the amount of $[…] which was calculated on the consideration for the part which included a core charge of $[X].
3. Subsequent to the initial transaction you supplied [the Company] with a used part for rebuilding or remanufacturing in exchange for consideration in the amount of $[X].
4. The amount paid by [the Company] for the used part did not include the HST.
RULINGS REQUESTED
You would like to know how the GST/HST applies to your supply of the used part to [the Company] and what happens to the HST that you paid to [the Company].
RULINGS GIVEN
Based on the facts set out above, we rule that GST/HST was not applicable to the supply of the used part made by you to [the Company]. In addition, [the Company] is required to include HST it collected on the total consideration payable for the remanufactured break caliper, including the core charge in its net tax calculation and remit any positive amount of net tax to the Receiver General for Canada.
EXPLANATION
Generally, every recipient of a taxable supply made in Canada shall pay the GST/HST calculated at the rate of 5% on the value of the consideration for the supply (15% in Nova Scotia, 13% in Ontario, New Brunswick, Newfoundland and Labrador and 14% in Prince Edward Island) unless the circumstances of the supply satisfy a specific exempting or relieving provision.
An additional amount is charged by some vendors when certain automotive parts are sold to a person. This is often referred to as a core or a casting charge.
Old or failed parts such as batteries, alternators, starters, CV shafts, brake callipers, and distributors contain a “core” or recyclable component. These cores can be provided to the manufacturer for rebuilding or recycling. Rebuilding or remanufacturing is the process of taking used parts, completely disassembling and thoroughly cleaning them, replacing the faulty and/or worn components with new components, and restoring them to their original specification.
A vendor may choose to impose a core charge to encourage the person to bring the used part to the vendor for rebuilding or remanufacturing. Some vendors of automotive parts do not apply a core charge.
Where an automotive part is sold and the vendor who is a GST/HST registrant charges a core charge, the core charge forms part of the consideration payable for the sale of the part. As such, the vendor is required to charge the applicable rate of GST/HST calculated on the total consideration payable for the part including the core charge. As a result, [the Company] correctly charged the HST for the supply of the new part. [The Company] is required to include the amount of HST charged on the total consideration including the core charge, in its net tax calculation. Any positive amount of net tax is required to be remitted to the Receiver General for Canada.
Where you provide a used part to the vendor, after the purchase of the new part from the vendor, you are making a supply of the used part to the vendor. If the used part is recyclable and the vendor agrees to purchase the used part, the vendor will pay an amount to you for the used part. Since you are not registered or required to be registered for the GST/HST, you do not charge or collect GST/HST from the vendor for the supply of the used part. As a result, [the Company] does not pay the GST/HST to you when you supply the used part to [the Company].
We have enclosed a copy of GST/HST Info Sheet GI-167 Application of the GST/HST to Core Charges which discusses the GST/HST treatment in detail, including the special trade-in rules that may apply in certain circumstances.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the rulings given in this letter provided that: none of the issues discussed in the rulings 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 613-954-5124. 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,
Ben Boboski
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
Enc.: GST/HST Info Sheet GI-167
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