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, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 158435
Dear [Client]:
Subject: GST/HST RULING
Application of the GST/HST to casting charges
Thank you for your fax of November 29, 2013, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to casting charges. We understand that you are requesting a ruling on behalf of […]([…][XYZ]).
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%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand:
1. [XYZ] is not registered nor required to be registered for GST/HST purposes.
2. On [mm/dd/yyyy], [XYZ] purchased two car parts from […] (the Store) [located in Canada].
3. Each of the parts is identified on the bill of sale as […].
4. The price of each part was $164.99 for a total of $329.98.
5. [XYZ] stated that an amount of $140 ($70 per part) was included in the total charged for the parts which represented a “casting charge”.
6. HST at the rate of 13% was charged on the total purchase price of the two parts (including the amount of the casting charge) in the amount of $42.90.
7. Later the same day, [XYZ] returned to the Store and provided two used castings.
8. [XYZ] was paid $70.00 by the Store for each casting for a total of $140.00.
9. [XYZ] was not paid an amount as HST in respect of the supply of the used castings.
RULING REQUESTED
You would like to know how the GST/HST applies to the payment of $140.00 made by the Store to [XYZ] for the used castings.
RULING GIVEN
Based on the facts set out above, we rule that GST/HST was not applicable to the supply of the used castings made by [XYZ] to the Store.
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 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.
EXPLANATION
Generally, every recipient of a taxable supply made in Canada shall pay 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, and Newfoundland and Labrador, and 14% in Prince Edward Island).
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 charge and may sometimes be referred to as 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 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 Store correctly charged the HST for the supply of the new parts.
Where the person provides a used part to the vendor any time after the purchase of the part from the vendor, the person is 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 the person for the used part. Where the person is not registered or required to be registered for the GST/HST, the person does not charge or collect the GST/HST from the vendor for the supply of the used part. This was the case for [XYZ]. As a result, the Store did not pay the GST/HST to [XYZ] when he supplied the used castings to the Store.
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.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9585. 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, Application of the GST/HST to Core Charges
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