16 February 2005 GST/HST Ruling 57030 - Application of Section 181 of the Excise Tax Act to Electronic Coupons

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.

This is in response to XXXXX regarding the subject matter. Your enquiry brings to the forefront an issue that has not previously been addressed by this unit. For this reason, we decided that it would be best to respond to your enquiry by way of a memorandum rather than by e-mail so as to ensure that our response to you is accessible to all GST/HST Rulings Centres.

XXXXX you indicated that you and XXXXX had encountered a situation where a corporation provided driving instruction services to an Indian band. You advised that it appears that the band acquired the driving instruction services to train some of its employees/officers, as well as to train some community members for the purpose of obtaining a driver's licence.

Both you and XXXXX are of the view that the supply of driving instruction by the corporation to the band is a taxable supply of a service. However, you are unsure whether the band can be said to have acquired this supply for band management activities, as defined in Technical Information Bulletin B-039R, GST Administrative Policy - Application of GST to Indians (B-039R). You believe that the activity for which the driving instruction services are acquired are not commercial activities for which input tax credits are available. The purpose of the activity is for the well being of the community but as you point out it is, in your view, not similar to an activity that is normally provided by other levels of government.

In response to your enquiry, we offer the following comments.

The provision of driving instruction by a commercial driving school is a taxable supply of a service as there are no provisions within the Excise Tax Act to exempt its supply. In order for an Indian band (or band-empowered entity) to acquire this type of service tax relieved, the requirements of B-039R must be met. B-039R provides point-of-sale tax relief to Indian bands (or band-empowered entities) on services acquired on or off reserve, other than transportation, short-term accommodation, meals and entertainment, where the supply is for band management activities or for real property on reserve.

As you know, B-039R defines "Band management activities" as "activities or programs undertaken by a band (or band-empowered entity) that are not commercial activities for which they would otherwise be entitled to an input tax credit. In determining whether the acquisition of a supply is for band management, the output of the activity or program will be the determining factor, as opposed to the objectives of the activity or program ..." The CRA subsequently clarified that activities designed for the well-being or assistance of the band members or are similar to those provided by other levels of government would constitute band management activities. This distinction served to provide some flexibility in determining what constitutes band management activities. It recognizes that activities or programs related to band governance for the benefit of band members may differ from those normally employed by other levels of government.

In the case at hand, the Indian band acquires driving instruction services from a corporation for its band officials and its band members. First, we will look at the acquisition for band officials. A "band official" is a person with the authority to represent the band in an official capacity. Persons acting on behalf of a band include, for example, employees, officers, chiefs, members of the band council and other band members, such as elders, who are representing the band in respect of band management activities. The term "officer" does not include contractors, consultants, or other self-employed persons, who are providing services to the band.

It is our view that where an Indian band (or band-empowered entity) acquires a taxable supply of driving instruction services for its band officials for use in band management activities, whether acquired on or off a reserve, the band will be entitled to tax relief on the acquisition provided the Indian band (or band-empowered entity) is either a non-registrant small supplier or is not involved in a commercial activity, as defined in subsection 123(1) of the Excise Tax Act, for which it is entitled to claim input tax credits. Where an Indian band (or band empowered entity) has paid tax in error on the acquisition of driving instruction services acquired for band officials, it will be entitled to a code 1 rebate in respect of the tax paid.

With respect to taxable driving instruction services acquired by an Indian band for its band members, it is our view that the band would be entitled to tax relief provided the supply is an input to band management activities, as previously defined. For example, if an Indian band as one of its programs offers driving instruction services free of charge or at a subsidized rate to its low income band members on a reserve as a way of assisting them to gain greater access to the job market and the band establishes the program's guidelines and eligibility criteria for this purpose, this program would be considered a band management activity. As such, the Indian band would be entitled to acquire the driving instruction services tax relieved. Again, if the Indian band paid tax in error on the acquisition of this service, it would be entitled to claim a rebate of the tax paid.

If you have any questions or would like to discuss this matter further, please call me at (613) 954-7952.

2005/02/18 — RITS 57507 — Importation of the XXXXX [Medical Device]