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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 115958
March 10, 2011
Dear [Client]:
Subject:
GST/HST INTERPRETATION
Unused balances in meal plans
We refer to the e-mails of June 16 and 25, 2009, sent by [...], concerning the application of the Goods and Services Tax (GST) to the refund or transfer of unused balances in meal plans supplied by universities and public colleges. We apologize for the delay in responding to your enquiry.
As the place of supply of the meals and meal plans is in Alberta, a province not participating in the Harmonized Sales Tax (HST), we have not discussed the application of the HST in this interpretation.
[...]
On November 1, 2008, the Government of Alberta introduced the Gift Card Regulation, under its Fair Trading Act, to ensure Albertans retain the full value of their prepaid purchase cards and that they have the necessary information to make prudent decisions when purchasing and using prepaid cards.
[...] [You have been asked about] the impact of the province's Gift Card Regulation to the university's supplies of meals under meal plans that are exempt of the GST under section 13 of Part III of Schedule V to the Excise Tax Act (ETA). [You have] determined that the university's meal plan, which utilizes a declining balance debit card, falls under the definition of "prepaid purchase card" under the Gift Card Regulation.
Specifically, under paragraph 1(b) of the Gift Card Regulation, "prepaid purchase card" means a written certificate, electronic card or other voucher or payment device with a monetary value for which a purchaser provides consideration and that:
(i) may or may not be increased in value or reloaded;
(ii) is purchased or loaded on a prepaid basis in a specific amount for the future purchase or delivery of goods or services; and
(iii) is honoured on presentation to a supplier;
and includes a gift card and gift certificate.
Also, under the Gift Card Regulation, a prepaid purchase card cannot have an expiry date and any unused balance remaining after its use cannot be withheld. Further, a supplier selling a prepaid purchase card must disclose any terms and conditions that affect the use of the prepaid purchase card on the card itself and on any packaging or promotional materials associated with the card. According to subsection 5(2) of the Gift Card Regulation, without limitation, the terms and conditions that must be disclosed include the following:
(a) contact information for the purpose of obtaining information about the prepaid purchase card, including the balance remaining on the prepaid purchase card;
(b) any restrictions, limitations or conditions that the supplier imposes on the use of the prepaid purchase card, including without limitation:
(i) that the prepaid purchase card cannot be exchanged for cash;
(ii) that the prepaid purchase card cannot be used to make a payment on a credit account; and
(iii) the return policy that will apply to purchases made with the prepaid purchase card.
[You consider] that where meal plans are pre-purchased in a specific value and plan funds are loaded onto an electronic card for future use at cafeterias or restaurants on campus, the Gift Card Regulation applies. Thus, where the funds in a meal plan are not depleted by the student, then any unused balance remaining under the meal plan at the end of a period must either be refunded to the student or carried forward for future use in whatever capacity afforded when originally purchased.
Interpretation Requested
[You] would like to know the CRA's interpretation of the exemption in the ETA for university and public college meal plans. Also, what is the GST treatment of an unused balance remaining in a meal plan account at the end of a university's or public college's meal plan period?
Interpretation Given
Section 13 of Part III of Schedule V to the ETA exempts a supply of a meal to a student enrolled at a university or public college where the meal is provided under a plan that is for a period of not less than one month and under which the student purchases from the supplier for a single consideration only the right to receive at a restaurant or cafeteria at the university or college not less than 10 meals weekly throughout the period.
The consideration paid by a student for a meal plan must be sufficient to provide the student with at least 10 meals each week for the period of the plan, which must not be less than one month. The calculation of whether the amount for the plan is enough for 10 meals a week should be based on the average retail price of a meal at the university's or public college's restaurants or cafeterias. The meals must be provided only at on-campus restaurants or cafeterias at the university or public college. The student may live on-campus or off-campus. A private operator may own or operate a restaurant or cafeteria on-campus where the meals are provided.
It's important to note that section 13 of Part III of Schedule V exempts the supply of a meal to a student where it is provided under a qualifying meal plan; that is, a meal plan that meets all of the conditions set out in the provision. The tax status of a supply for purposes of section 13 of Part III of Schedule V is to be determined at the time the student initially enters into the agreement with the supplier and will not be impacted if, at the end of the plan period:
(a) unused funds may be refunded to the student; or
(b) unused funds may be carried forward for use in the future by the student.
Supplies of meals provided under meal plans that do not meet all of the conditions will not be exempt under section 13 of Part III of Schedule V to the ETA. Examples of where the conditions are not met include:
• where the plan period is less than one month;
• the plan is provided to a person (e.g., teacher, employee) who is not a student enrolled at the university or public college where the meals are to be provided under the plan;
• the plan includes the right to purchase meals at restaurants or cafeterias or other eating establishments off-campus;
• the plan includes the right to purchase items at a mini-mart, convenience store, tuck shop or other such establishment on-campus or off-campus; or
• the plan includes the right to purchase non-food or vending machine items.
At the end of a meal plan period, where there is an unused balance remaining in a student's qualifying meal plan account, there will be no GST exigible on that amount where the unused balance is refunded to the student.
Please note however, that where the unused balance is carried forward for future use, whether GST will apply will depend on whether that amount is consideration for a supply and the tax status of that supply at the time the consideration is paid or becomes due.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 1-613-952-9592. 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,
Nadine Kennedy
Charities, Non-profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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