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: 203162
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
[…][Supplies of Services of Tutoring or Instructing]
Thank you for your letter of September 23, 2019, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of services made by […] (the Partnership) using […][the Program]. We apologize for the delay in our response.
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.
STATEMENT OF FACTS
We understand that the following statement of facts applies to your situation.
1. […] (the Partnership) is a partnership that provides instruction to beginning and struggling readers […].
2. The Partnership renders the instruction to individuals using the […](the Program). The provision of the Program is the only business activity of the Partnership.
3. The Partnership has been charging GST/HST on its supplies since it was registered effective [mm/dd/yyyy].
4. Clients are located through […] and word of mouth. The Partnership rents office space where the services are provided.
5. The Program is not a course that is approved for credit by an elementary or secondary school in the province where the Partnership operates. However, the purpose of the Program is to help struggling students learn the academic fundamentals of reading, writing, and spelling which support the students’ learning in their school curriculum and facilitates success for the students within the public school system.
6. The Program focuses on basic English language skills. The content of the Program begins at a kindergarten level of difficulty with review of the alphabet, vowel sounds, decoding words, and basic reading and spelling.
7. The Program is a multi-sensory structured language program based on the Orton Gillingham method of reading instruction. […].
8. The Program uses a variety of multi-sensory activities to ensure that all pathways to the brain are stimulated to maximize learning. The Program is flexible in terms of materials and methods used to allow individuals with both visual and active learning styles to retain the content of what is taught.
9. The Program follows a direct instruction method; one-on-one individualized instruction is used […].
10. The Program helps individuals attain the skills necessary to successfully complete Language Arts courses offered by local school authorities. The partners often meet with teachers at the local school authorities to ensure that they are matching and supplementing the regular classroom content based on the specific needs of the individual.
11. […], who are teachers by profession, render the services to individuals who are typically primary or secondary school children. However, the business has had adult clients.
12. The materials used to administer the program include: […]
RULING REQUESTED
You would like to know if the services supplied by the Partnership are exempt of the GST/HST.
RULING GIVEN
Based on the facts set out above, we rule that the Partnership’s supplies of services of instructing individuals in the Program are exempt of the GST/HST.
EXPLANATION
Section 9 of Part III of Schedule V (Section 9) exempts, in part, a supply of a service of tutoring or instructing an individual in a course that is approved for credit by, or that follows a curriculum designated by, a school authority. “School authority” is a term defined in the ETA to mean “an organization that operates an elementary or secondary school in which it provides instruction that meets the standards of educational instruction established by the government of the province in which the school is operated.”
The Program is not a course that is approved for credit by a school authority. As a result, a supply of tutoring or instructing an individual in a course that follows a curriculum designated by a school authority is the only possible exemption that could apply to the Program. The method of instruction used in the Program is not relevant to the application of Section 9.
The Program is an instructional program in basic English language skills that targets beginning and struggling readers. The supply of instruction in basic English language skills by the Partnership consists of general concepts and relevant subject matter designed to assist struggling individuals in understanding the content of the Language Arts curriculum of local school authorities. Basic English language skills are an essential part of the curriculum designated by school authorities in the province where the Partnership operates. As a result, the Program involves the making of supplies of tutoring or instructing an individual in a course that follows a curriculum designated by a school authority. Therefore, these supplies are exempt from the GST/HST.
ADDITIONAL INFORMATION
Remittance and Refund of GST Charged in Error
A supplier who collects an amount as or on account of GST/HST in error is required to include that amount in its net tax for the reporting period in which it was collected and to remit any net tax amount owing for the reporting period.
The Partnership may wish to adjust, refund or credit amounts that were charged or collected as or on account of tax in error from customers in respect of exempt supplies. The Partnership is not obligated to adjust, refund or credit tax charged or collected from customers in error. However, if an amount of GST/HST charged or collected is adjusted, refunded, or credited, the supplier must provide the recipient with a credit note (unless the recipient issues a debit note) containing prescribed information. A person has up to two years from the day on which the excess amount was charged or collected to make the adjustment, refund or credit to the customer. For additional information, please refer to GST/HST Memorandum 12-2, Refund, Adjustment, or Credit of the GST/HST under Section 232 of the Excise Tax Act, which also provides information regarding the prescribed information to be included in a credit or debit note.
If a supplier adjusts, refunds or credits an amount as or on account of tax to a customer, the person may only claim a deduction, for the amount as or on account of tax adjusted, refunded or credited, in the reporting period of the person in which the credit is issued or the debit note is received.
If the supplier does not refund or credit the amounts it collected as tax in error from its customer, the customer may apply for a rebate in order to recover the tax paid in error. In the event that this situation arises, the supplier could advise its customer who has paid an amount as tax paid in error to apply for a rebate using application GST189, General Application for Rebate of Goods and Services Tax (GST)/Harmonized Sales Tax (HST). The rebate must be filed within two years from the day the amount was paid or remitted.
Input tax credits
Generally, a GST/HST registrant is eligible to claim input tax credits (ITCs) to recover the GST/HST it pays to the extent that its purchases and expenses are inputs into making taxable supplies for consideration. No ITC is available where an expense was incurred for the purpose of making exempt supplies, or for a purpose other than the making of supplies. Therefore, a person making only exempt supplies is not entitled to ITCs.
For more information, see Guide RC4022, General Information for GST/HST Registrants, which may be accessed on our website at canada.ca/en/revenue-agency/services/forms-publications/publications/rc4022.html.
Deregistration
The Partnership is neither required nor permitted to be registered for GST/HST purposes as its only business activity is the making of exempt supplies. For greater certainty, the Partnership is eligible to cancel its registration for GST/HST purposes. Registrants are to inform the CRA of situations requiring the cancellation of registration, as well as any circumstances requiring an amendment of registration. To cancel your GST/HST registration, please send us completed Form RC145, Request to Close Business Number Program Accounts. Alternatively, you may request cancellation of your registration by calling the Business Window at 1-800-959-5525 or in writing as long as all necessary information is received. In addition, the registrant must submit any returns, remittances, or balances owing, up to and including the cancellation date. You may wish to refer to GST/HST Memorandum 2-7, Cancellation of Registration, for further information.
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 given in this letter provided that: none of the issues discussed in the ruling 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. Any additional information given in this letter is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA's interpretative policy could affect 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 343-573-6095. 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,
Andrew Kaye
Government Sectors and Indigenous Affairs Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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