3 August 2007 GST/HST Ruling 64981 - Application of GST/HST to fully-serviced mortgages

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 the redemption of points.

For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.

We understand that you redeemed points at a retailer and received goods in exchange for those points. You were charged GST on the price that would have been charged for the goods despite there being no monetary consideration.

I apologize for the delay in responding to your question. The Canada Revenue Agency (CRA) position on loyalty program points and the GST/HST has been under review. It would appear from your question and the limited information provided that you should not have paid GST on the purchase of products when redeeming points.

When a retailer accepts loyalty program points as full or partial consideration for the supply of a property or service the value of the consideration for the supply is the amount by which the value of the consideration for the supply exceeds the discount or exchange value of the points. In other words GST/HST is charged on the amount you would pay (if any) after the points are redeemed.

When GST/HST is paid in error and the registrant refuses to refund that GST/HST, an individual such as yourself may file a GST189 General Application for Rebate of GST/HST with the CRA. Instructions for filling out and filing the form are included with the rebate form. Upon receipt of the form the CRA will examine the merits of the claim and proceed accordingly. The form is enclosed for your convenience but can also be found on the CRA website at http://www.cra-arc.gc.ca/E/pbg/gf/gst189/README.html.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613 952 9220.

Yours truly,

Larry Springstead
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2007/05/15 — RITS 65393 — GST/HST Status of Revenues Received from Fees in Respect to the XXXXX Card