14 August 2006 GST/HST Ruling 81097 - Application of GST/HST on XXXXX in the form of XXXXX

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:

Thank you for your fax XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the GST rate change and your eligibility for an Input Tax Credit (ITC) on the purchase of hotel rooms. Your request has been transferred from the XXXXXGST/HST Rulings Centre to the Services and Intangibles Unit of the General Operations and Border Issues Division for response.

All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.

As you know, effective July 1, 2006, the rate of the GST has been reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST/HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to Reduction in the Rate of the GST/HST - Questions and Answers (http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html) on the CRA Web site.

Statement of Facts

•   XXXXX.

•   The Company is a Canadian tour operator who resells XXXXX blocks of hotel rooms XXXXX to non-registrant non-resident tour operators XXXXX.

•   XXXXX.

•   After, July 1, 2006, the Company received an invoice from the hotel for short-term accommodation and was charged GST at 6%.

•   XXXXX.

Ruling Requested

You would like to know if the Company may claim an ITC on the purchase of hotel rooms calculated at 7% for those advance sales on which the rebate was calculated at 7% instead of 6%, even though the Company has been invoiced GST at 6% by the hotel.

Ruling Given

Based on the facts set out above, we rule that the Company is entitled to claim an ITC for the amount of the GST at 6% as shown on the invoice from the hotel provided all of the conditions under section 169 have been met.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is 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 169 provides that, in order for a person to be eligible to claim an ITC for the tax payable in respect of property or a service, the following conditions must be met:

1. the property or service must be supplied to or imported by the person;

2. the person must be a GST/HST registrant during the reporting period in which the supply or importation is made;

3. tax must be payable by the person in respect of the supply or importation, or be paid by the person prior to its becoming payable;

4. the property or service must be acquired or imported by the person for the purpose of consumption, use or supply in the course of commercial activities of the person; and

5. the person must have obtained sufficient documentary evidence, including any prescribed information as set out in the Input Tax Credit Information (GST/HST) Regulations, to establish the eligibility for the ITC before the claim is made.

For your convenience, find enclosed a copy of GST/HST Guide, Information for the Travel and Convention Industry and GST/HST Memorandum 1.4, Goods and Services Tax Rulings.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-9700.

Yours truly,

Michèle Routhier, CMA
Technical Analyst
Services and Intangibles Unit
General Operations & Border Issues Division
Excise and GST/HST Rulings Directorate

2006/07/28 — RITS 81356 — Application of GST/HST to Cemetery Products and Services