10 September 2007 GST/HST Interpretation 50595 - All-inclusive price

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 letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to certain courses provided by the XXXXX. We apologize for the delay in responding to your enquiry.

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

Statement of Facts

We understand:

1. The XXXXX is a "school authority" as that term is defined in subsection 123(1). It is also a GST/HST registrant.

2. The XXXXX provides a variety of general interest and leisure courses to the public through its Continuing Education Department. The courses are presented by instructors in various XXXXX facilities XXXXX.

3. The program facilitator and the director of the Continuing Education Department are directly responsible for approving courses. The Board of Trustees for the XXXXX oversees the Continuing Education Department.

4. The XXXXX has not filed a form GST29, Election and Revocation of the Election to Make Certain Supplies Taxable, under section 8 of Part III of Schedule V in respect of any of its supplies.

5. The minimum age to enrol in most of the courses is 16 and, unless specified, all materials and supplies are included with the registration fee.

6. You requested a ruling on the tax status of the following non-credit courses and workshops offered by the XXXXX:

XXXXX

7. The XXXXX also offers various personal and professional development workshops on an individual basis.

Ruling Requested

You would like to know how the GST applies in respect of the above courses and workshops supplied to local residents by the XXXXX.

As we discussed over the telephone, where sufficient facts have been provided on the specifics of a course or workshop we are able to provide a ruling. However, for those courses or workshops where we do not have all the necessary facts, we are pleased to provide a general interpretation on the application of GST/HST to those supplies following the ruling given below.

Ruling Given

Based on the facts set out above, we rule that the following supplies made by the XXXXX are exempt supplies and, therefore, are not subject to GST/HST:

•   Services of instructing individuals in the following courses are exempt supplies under section 2 of Part III of Schedule V:

XXXXX

•   Services of instructing individuals in the following course are exempt supplies under section 8 of Part III of Schedule V:

XXXXX

•   Services of tutoring or instructing an individual in the following courses are exempt supplies under paragraph 9(b) of Part III of Schedule V:

XXXXX

•   Services of instructing individuals in the following courses are exempt under section 11 of Part III of Schedule V:

XXXXX

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

Most supplies of property and services that are made in Canada are taxable supplies subject to the GST or the HST (for supplies made in a province that is participating in the HST) unless the supply is a zero-rated supply or an exempt supply. Zero-rated supplies are taxable at the rate of 0% and are listed in Schedule VI. Exempt supplies are listed in Schedule V and are not subject to GST/HST.

Exempt supplies

In particular, Part III of Schedule V lists provisions that exempt certain supplies of educational services where specific conditions are met. The provisions that may apply to the XXXXX supplies in respect of courses and workshops are discussed below.

Elementary or secondary school courses Section 2 of Part III of Schedule V

Under this provision, a supply made by a school authority in a province of a service of instructing individuals in a course that is provided primarily (more than 50%) for elementary or secondary school students is an exempt supply.

As the XXXXX supplies of services of instructing individuals in XXXXX courses are provided primarily for elementary and secondary students they are exempt supplies under section 2 of Part III of Schedule V.

Student services Section 4 of Part III of Schedule V

This provision exempts a supply made by a school authority of a service performed by an elementary or secondary school student or by an instructor of an elementary or secondary school student in the ordinary course of the instruction of the student.

For example, if it is standard practice during a course of instruction of a student that the student perform a particular service (e.g., haircut, auto repairs, computer training, etc.) as part of taking the course (e.g., beautician course, autobody course, computer education course, etc.) and the student is to render this service normally after regular school hours, then the service may fall under section 4 of Part III of Schedule V, providing the school authority is making a supply of the service performed by the student. However, if it is not standard practice for a student to perform such a service after regular school hours then the supply will not be exempt under section 4 of Part III of Schedule V.

XXXXX

Credit courses or examinations Section 7 of Part III of Schedule V

A supply made by a school authority, public college or university of a service of instructing individuals in, or administering examinations in respect of, courses for which credit may be obtained toward a diploma or degree is exempt under this provision.

While none of the courses listed above are credit courses, it was noted on the XXXXX web site, that it may from time to time offer instruction in a course for which credit may be obtained. Where such credit goes toward a diploma or degree, the supply of the service may be exempt under section 7 of Part III of Schedule V.

Vocational courses Section 8 of Part III of Schedule V

This provision exempts a supply, other than a zero-rated supply, made by a school authority (amongst others), of a service of instructing individuals in, or administering examinations in respect of, courses leading to certificates, diplomas, licences or similar documents, or classes or ratings in respect of licences, that attest to the competence of individuals to practise or perform a trade or vocation, except where the supplier has made an election that the supply not be exempt under this provision.

The CRA will consider a course to provide individuals with the competence to practise a trade or vocation if the course has a direct link to skills that are recognized by the CRA as relating to the ability to gain or retain a trade or occupation. Single courses that are in the nature of general advice and counsel, such as resume writing or life-skills courses, are not considered to prepare individuals for a particular trade or vocation and thus, are not exempt under this provision.

Further, the course must lead to documentation that attests to the competence of individuals to practise or perform a trade or vocation. In general, this condition is considered to be met where the course is administered on a pass/fail basis and the student's competence is evaluated on a single, or series of, tests, graded materials or projects and the student is awarded documentation upon successfully completing the course. Documentation that is awarded to students based on attendance alone, class participation alone, or a combination of attendance and class participation, is generally not considered to attest to the competence of individuals to practise or perform a trade or vocation.

Please refer to GST/HST Policy Statement P-231, Courses that Qualify for Exemption Pursuant to Section 8 of Part III of Schedule V to the Excise Tax Act, available on the CRA web site, that clarifies in more detail the meaning of "courses leading to certificates, diplomas, licences or similar documents, or classes or ratings in respect of licences, that attest to the competence of individuals to practise or perform a trade or vocation".

The XXXXX service of instructing individuals in the XXXXX is exempt under section 8 of Part III of Schedule V as the XXXXX Certificate is awarded on a pass/fail basis and attests to the competence of individuals to work as a XXXXX establishment. The XXXXX requires particular persons operating or working in XXXXX establishments to have this certification.

Tutoring or instructing services  Section 9 of Part III of Schedule V

This provision exempts a supply of a service of tutoring or instructing an individual in:

(a) a course that is approved for credit by, or that follows a curriculum designated by, a school authority;

(b) a course that is a prescribed equivalent of a course described in paragraph (a); or

(c) a course the successful completion of which is mandatory for admittance into a particular course described in paragraph (a) or (b) and not for admittance into any other course that is a prerequisite to the particular course.

The Equivalent Courses (GST/HST) Regulations under the ETA provide that music lessons are prescribed equivalents of music courses that follow a curriculum designated by a school authority.

The CRA views music lessons to include lessons that develop skills in musical performance involving the use of the human voice or musical instruments, conducting an orchestra or musical composition. The CRA views a lesson as part of a series of instruction designed to result in a progression or development of skills toward a pre-set lesson goal or objective where there is an evaluation of the student's progress. Music lessons would not include instruction in music-recording skills, music history or the teaching of techniques of music education.

The XXXXX supplies of a service of instructing individuals in the courses, XXXXX, are exempt supplies under paragraph 9(b) of Part III of Schedule V as each course consists of a series of lessons teaching students how to play the XXXXX.

Whether any of the other continuing education courses offered by the XXXXX fall under section 9 of Part III of Schedule V is a question of fact. From the information provided, none of the other continuing education courses listed above is approved for credit by a school authority. Further, there was no information provided to support that any of these courses follow a curriculum designated by a school authority or is a prerequisite to such a course or a credit course. Therefore, we are unable to rule that any of the other courses would fall under this provision.

Second-language courses Section 11 of Part III of Schedule V

This provision exempts a supply made by a school authority (amongst others) of a service of instructing individuals in, or administering examinations in respect of, language courses that form part of a program of second-language instruction in either English or French.

The XXXXX offers a second-language program of three courses in progressive levels of French and thus, its services of instructing individuals in XXXXX, are exempt supplies under section 11 of Part III of Schedule V. However, its services of instructing individuals in XXXXX language courses are not exempt supplies under this provision.

Non-credit courses as part of a program Section 16 of Part III of Schedule V

This provision exempts a supply made by a school authority (amongst others), of a service of instructing individuals in, or administering examinations in respect of, courses where all of the following conditions are met:

•   the courses are not courses in sports, games, hobbies or other recreational pursuits that are designed to be taken primarily for recreational purposes;

•   the courses are part of a program that consists of two or more courses; and

•   the program is subject to the review of, and is approved by, a council, board or committee of the school authority established to review and approve the course offerings of the school authority.

Whether a particular course is in the nature of a sport, game, hobby or other recreational pursuit that is designed to be taken primarily for recreational purposes is a question of fact. It is recognized that many recreational pursuits have an element of educational value and skill enhancement. However, this does not preclude that the primary purpose may still be recreational in nature. Generally, recreational courses are targeted to individuals who are interested in personal development or entertainment, furthering of a hobby, etc., rather than as an occupational interest.

As noted above, a service of instruction in a course that is not part of an approved program of at least two courses, would not qualify for exemption. A program should have a purpose as a whole and the courses in the program should fit together in a coherent way or in a logical sequence. A program is something more than a miscellaneous collection of courses in a given topic area or under a particular heading and it is the program itself that must be reviewed and approved by the council, board or committee of the educational institution.

It is not necessary that an individual take all the courses in a program. Also, it is possible that a program may have some courses that meet the exemption requirement in section 16 of Part III of Schedule V while others would not, as the exemption does not necessarily extend to all courses under that program. Each course must be evaluated separately.

Therefore, for the other XXXXX courses listed above for which a ruling was not provided, it is necessary to determine whether any of the courses form part or all of a program of at least two courses and, if so, whether that program was subject to the review of, and was approved by, a council, board or committee of the XXXXX. Further, it is necessary to determine whether a particular course is in the nature of a sport, game, hobby or other recreational pursuit designed to be taken primarily for recreational purposes. Several factors may be examined in making such a determination, including reviewing the course content and objectives, the marketing and promotion of the course, the methods of teaching and evaluation of students, the consideration and terms of payment for the course, etc. Unfortunately, we did not receive sufficient information on the XXXXX courses to make these determinations. Hopefully, the above information will assist the XXXXX in determining whether any of its courses meet the exempting conditions under section 16 of Part III of Schedule V.

In conclusion, there are many factors to be considered when determining whether a particular supply made by the XXXXX is exempt under any of the provisions of Part III of Schedule V. Each course must be looked at on a case-by-case basis. We hope that the above information will assist you in determining the tax status of supplies in respect of courses that the XXXXX may offer in the future.

Other Information

You indicated that the XXXXX occasionally offers single workshops provided primarily to adults and you would like some general information on how the GST applies to these supplies.

Workshops and seminars are not generally considered to be courses. Admissions to access or attend a workshop or seminar are supplies of intangible personal property for GST/HST purposes. Further, such supplies will not be exempt under any provisions in Part III of Schedule where they are provided primarily to adults.

Thus, it is important to establish whether a particular supply made by the XXXXX is a supply of a service of instruction in a course or a supply of an admission to a workshop or seminar when determining the tax status of that supply.

Factors indicating a supply is that of a service of instruction in a course include:

•   the activity involves the provision of systematic instruction;

•   the supplier monitors or supervises the progress or learning of the participant;

•   the supplier assesses the participant's progress during the course of the activity and provides ongoing support, feedback and guidance to the participant;

•   the supplier may be available to assist the participant with the subject matter at a time and location different from the time and place in which the activity occurs;

•   the supplier assesses the competency of the participant upon completion of the activity by requiring the participant to formally demonstrate the knowledge the participant has acquired and if the competency is not achieved, the activity may have to be repeated;

•   the participant is required to invest time and effort outside of the activity (e.g., completing assignments, reading course material);

•   successful completion of verified prerequisites may be required before the participant may take part in the activity;

•   the participant may be required to successfully complete the activity before being permitted to participate in another activity;

•   the activity is part of a series of activities leading to a formal recognition of skills;

•   the activity may be part of a program that consists of a series of two or more related activities;

•   the activity occurs at set intervals over an extended period of time such as weeks or months;

•   the activity does not include the provision of rights or if there is a provision of rights they are incidental to or part of a single supply of a service;

•   the subject of the activity is broad;

•   the supplier advertises or promotes the activity as instructing participants;

•   the activity is promoted together with other activities in a prospectus or calendar prepared by an educational institution;

•   the promotional material indicates that the activity is part of a broader program which may lead to a formal recognition of skills;

•   the promotional material is aimed at persons who possess any prerequisites required to participate in the activity.

Factors indicating a supply is that of an admission to a workshop or seminar include:

•   there is little individualized interaction between the supplier and the participant;

•   attendance at the activity is sufficient for the participant to receive evidence of successful or satisfactory completion of the activity;

•   the supplier's purpose with respect to the activity is principally to provide information to, or to facilitate the exchange of information amongst, participants;

•   the subject of the activity is narrowly focused;

•   each activity is discrete with no formal prerequisites for attendance;

•   participation in the activity does not serve as a prerequisite for participation in another activity;

•   the activity is promoted as a stand-alone activity;

•   the activity is promoted as a workshop or seminar to the general public;

•   the activity occurs during a brief, concentrated period of time, such as a few hours, a day or a few consecutive days.

Please note that certain supplies of admissions made by a "public institution" may be exempt under provisions in Part VI of Schedule V where specific conditions are met. A "public institution" is defined in the ETA to include a school authority that is a registered charity for income tax purposes. Unfortunately, we are unable to confirm at this time that the XXXXX is a registered charity for income tax purposes.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9592.

Yours truly,

Nadine Kennedy, CMA
Charities, Non-profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2007/07/26 — RITS 63048 — Application of GST/HST to Fully-serviced Mortgages