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: 129800
March 16, 2011
Dear [Client]:
Subject:
GST/HST RULING
Status of a Factory Rebate certificate in regards to GST/HST
Thank you for your letter of October 31, 2010, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to a "Factory Rebate" certificate that you make available to your customers.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
We understand the following facts:
1. Your company, [...], is a registrant for the purpose of the ETA;
2. Your company's head office is located in [City 1, Province X];
3. Your company manufactures and sells products directly to end users, who are primarily farmers and acreage owners [...];
4. The equipment sold by your company is used for [...];
5. At the time of sale, the customer is given a "Factory Rebate" certificate which must be given to the technician at the time of installation of the system, the technician then has to send the "Factory Rebate" certificate to your company, who then issues a "rebate cheque" to the customers for $[...]. On the cheque, there is a notation saying $[...] + [...]GST and the cheque-stub has the same details for auditing and ITC purposes;
6. The "Factory Rebate" certificate states that the equipment has to be installed within [...] days of order for the customer to be entitled to receive this "Factory Rebate".
Ruling Requested
You would like to know if the procedure that you follow when issuing your "Factory Rebate" certificate meets the essential requirements for it to be considered a rebate for the purpose of section 181.1.
Ruling Given
Based on the facts set out above, we rule that the procedure that you follow when issuing your "Factory Rebate" certificate meets all the essential requirements to be considered a rebate within the meaning of section 181.1.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
Section 181.1 applies to certain rebates paid in respect of property or a service. In order for this section to apply the following conditions have to be met:
• The registrant makes a taxable supply in Canada of property or a service that is not a zero-rated supply;
• A particular person, the customer, acquires the property or service from the registrant or another person;
• The registrant gives a rebate in respect of the property or service to the customer (a particular person) with a written indication on such rebate that a portion of the rebate is an amount on account of tax; and
• Subsection 232(3) does not apply to this rebate.
Where all those criteria are met, section 181.1 applies to the rebate offered by the registrant. The registrant supplier may then claim an ITC equal to the tax fraction in respect of the rebate for the reporting period that includes the time when the rebate was paid and the particular person, if a registrant, is deemed to have made a taxable supply and to have collected such tax.
In your case, the registrant supplier, your company, makes a taxable supply to a particular person, the end user. After the installation is completed, your company sends a cheque in exchange for the amount claimed by the end user at the time of installation. On this cheque, there is a notation saying $[...] + [...]GST and the cheque-stub has the same details for auditing and ITC purposes.
Also, section 181.1 can only apply as long as subsection 232(2) does not apply to this rebate. Subsection 232(2) relates to a reduction of the consideration which would be the case were it not a rebate.
For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-8811. 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,
Jasmine Gallant
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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