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: 160861
Dear [Client]:
Subject: GST/HST INTERPRETATION
Casting/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 casting/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%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We understand:
* You purchased certain automotive parts from ([…][the Company]).
* You paid the HST on the consideration for the parts which included a core or casting charge.
* Subsequent to the initial transactions, you supplied [the Company] with used parts. You were paid an amount equal to the core charges but you were not paid HST in respect of your supply of the used parts.
INTERPRETATION REQUESTED
You would like to know how the GST/HST applies to a supply of automotive parts where the consideration includes a casting or core charge.
INTERPRETATION GIVEN
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 although it 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, 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 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.
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 interpretation given in this letter, including any additional information is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation or the additional information provided herein. If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-9585. 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.: Info Sheet GI-167, Application of the GST/HST to Core Charges
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