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: 97182
Business Number: [...]
July 25, 2011
Dear [Client]:
Subject:
GST/HST INTERPRETATION
Refunds and carryovers of balances in a meal plan account
Thank you for your fax of August 29, 2007, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to refunds and carryovers of balances in a meal plan account. We apologize for the delay in our response.
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.
We understand that [...] [the Company] is a catering company [...]. When the meal plans were sold to the students the conditions for the exemption in section 13 of Part III of Schedule V to the ETA were satisfied. However, after the period of the meal plan has expired some of the students still have balances on their meal plans that are either refunded back to them or are carried forward to a new plan. Some of the refund/carryover amounts are quite significant. Also, some students request a refund before the time period for the meal plan has expired.
[The Company's] current policy is that if the student requests a refund or carryover, it determines whether the amount refunded exceeds the purchase price of the plan less the average price of 10 meals a week times the number of the weeks the plan had been used prior to the refund or carry over. If so, [the Company] taxes the purchases the student previously made on the meal plan and gives them a refund/carryover less the applicable tax on the meals purchased.
Interpretation Requested
You would like to know if there are any GST/HST consequences in issuing the refund or carryover to students. If there are GST/HST consequences, how is the GST/HST calculated.
Interpretation Given
Under section 13 of Part VI of Schedule V to the ETA, the following supply is exempt of the GST/HST:
"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."
Therefore, meals provided to a student under a meal plan that meets all of the following conditions (herein referred to as a "qualifying meal plan") are exempt under section 13 of Part III of Schedule V to the ETA:
• The meals are provided to a student enrolled at the university or public college who lives either on-campus or off-campus.
• The student pays a single amount for the plan.
• The single amount is sufficient for the student to receive at least 10 meals each week for the period of the plan. The calculation of whether the amount for the plan is enough for 10 meals a week should be based on the average price of a meal at the university or public college cafeterias or restaurants.
• The plan is for a period of at least one month.
• The meals are served only at an on-campus restaurant or cafeteria (i.e., on the property of the university or public college). A private operator may own or operate the restaurant or cafeteria where the meals are served, provided it is on campus.
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, unused funds may be refunded or carried over for use in the future. The tax status of the meals already supplied under a meal plan will not be impacted if the plan is cancelled during the plan period and unused funds are refunded.
Amounts collected as or on account of tax
Where a supplier has charged to, or collected from, another person an excess amount as or on account of tax on supplies that are exempt, then tax would be considered to have been collected in error. Subsection 225(1) requires a person who collects amounts as or on account of tax to include the amounts collected in their net tax calculation. As a result, tax collected in error must either be remitted to the Canada Revenue Agency or in accordance with section 232, be refunded or credited to the recipient (the purchaser).
If the supplier refunds or credits the amounts collected as GST/HST, it must do so within two years after the day the amount was charged or collected and it must provide the recipient with a credit note containing prescribed information (iFootnote 1). The amount of excess tax adjusted, refunded, or credited may be deducted in determining the net tax of the supplier for the reporting period in which the credit note is issued to the recipient, to the extent that the amount has been included in determining the net tax for the reporting period or a preceding reporting period.
Alternatively, persons who have paid an amount as GST/HST on supplies that are exempt may make an application to the CRA for a rebate of tax paid in error under section 261 using form GST189 "General Application for Rebate of GST/HST" (available on CRA's Web site). The time limit to apply for this rebate is within two years after the day the amount was paid.
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 CRA 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 613-954-4206. 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,
Carol A Gaudet
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
i (1) The prescribed information is described in paragraph 16 of GST/HST Memoranda Series 12.2 "Refund, Adjustment, or Credit of the GST/HST under Section 232 of the Excise Tax Act", available on the CRA's Web site www.cra.gc.ca.
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