10 February 2005 GST/HST Ruling 54355 - Computer Software Programs Used by Blind Individuals

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

I refer to your letter XXXXX and our telephone conversations regarding the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of cannabis as well as the entitlement to claim input tax credits (ITCs). In your letter XXXXX, you indicated that XXXXX is a potential bidder on the XXXXX.

Statement of Facts

Based on the information set out in your letters and our telephone conversations, our understanding of the facts is as follows:

1. XXXXX.

2. The XXXXX is registered for purposes of the GST/HST.

3. The XXXXX would incur various expenses such as leases, equipment, genetics, gardeners, power, fertilizer and security in order to fulfill its XXXXX with XXXXX.

Rulings Requested

1. Are supplies of cannabis to XXXXX subject to the GST/HST?

2. Would the XXXXX be entitled to claim ITCs for the GST/HST paid on the goods and/or services described above?

Rulings Given

Based on the facts set out above, we rule that:

1. The supply of cannabis to XXXXX is subject to the GST/HST at the rate of 7% / 15%.

2. To the extent that the XXXXX has paid the GST/HST on the goods and/or services described above (in order to make taxable supplies of cannabis to XXXXX), the XXXXX would be entitled to claim ITCs.

These rulings are subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by these rulings provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act (the "ETA") or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

The supply of cannabis, as described above, does not fall under any of the exempting or zero-rating provisions in the ETA. Consequently, supplies of cannabis are taxable at a rate of 7% / 15%. A taxable supply (other than a zero-rated supply) made in Canada is subject to GST at 7%, or HST at 15% if made in a participating province (New Brunswick, Nova Scotia and Newfoundland and Labrador).

Persons registered for the GST/HST are entitled to claim ITCs for the tax paid or payable on their purchases to the extent that the purchases were acquired or imported for consumption, use or supply in the registrants' commercial activities. Commercial activity means any business, adventure, or concern in the nature of trade carried on by a person to provide taxable goods and services.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 941-3268.

Yours truly,

Tim Krawchuk
Manager
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division

2005/03/07 — RITS 54859 — Reimbursement of Salaries and Benefits