10 May 2007 GST/HST Ruling 91261 - Oilfield Services 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 XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to a XXXXX levy XXXXX.

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

We understand from the information you provided in your XXXXX, that the XXXXX.

XXXXX.

XXXXX.

XXXXX.

Taking into account previous information from your XXXXX, we are assuming XXXXX.

Interpretation Requested

You would like to know if the levy XXXXX would meet the requirements of paragraph 3(b) of the Taxes, Duties and Fees (GST/HST) Regulations (the "Regulations") and would not be subject to GST.

Interpretation Given

Paragraph 154(2)(b) provides that the consideration for a supply of property or a service includes "any provincial levy payable by the recipient, or payable or collectible by the supplier, in respect of that supply, or in respect of the consumption or use of the property or service, other than a prescribed provincial levy that is payable by the recipient."

Pursuant to subsection 154(1), a provincial levy means "a tax, duty, or fee imposed under an Act of the legislature of a province in respect of the supply, consumption or use of property or a service."

Pursuant to paragraph 3(b) of the Regulations, a tax is prescribed under the Regulations for purposes of section 154 if it is imposed under an Act listed in the definition of "general sales tax rate" in subsection 2(1) of the Regulations, where it is in respect of property or a service, and

"(i) the tax is calculated as a percentage of the value or price of the property or service,

(ii) the tax is payable by the recipient of a supply of the property or service,

(iii) the tax is not included in the value or price of the property or service for purposes of calculating any other tax under that Act in respect of that property or service, and

(iv) the total of the rates of all taxes that are imposed under that Act in respect of the property or service and calculated as a percentage of the value or price of the property or service does not exceed the specified tax rate of the province."

The "general sales tax rate" of a province is defined in subsection 2(1) of the Regulations and includes "the rate of tax set out in XXXXX.

The "specified tax rate" of a province is also defined in subsection 2(1) of the Regulations. It is defined as "the rate that is the greater of (a) 12%, and (b) the general sales tax rate of the province plus 4%".

Therefore, a tax imposed by an Act listed in subsection 2(1) of the Regulations in respect of property or a service is prescribed for purposes of section 154 where it meets all the requirements under paragraph 3(b) of the Regulations. Pursuant to section 154 a prescribed provincial levy is not included in the consideration for a supply of property or a service, and therefore is not subject to GST/HST.

In the context of the XXXXX levy XXXXX it is our view that the XXXXX levy would meet the requirements of paragraph 3(b) of the Regulations on the basis that

a) the levy is in respect of XXXXX and is to be imposed under the XXXXX, an Act that is listed in subsection 2(1) of the Regulations

b) it is calculated as a percentage of the price of XXXXX

c) it is payable by the recipient of the supply of XXXXX

d) it is not included in the value or price of XXXXX for purposes of calculating any other tax under the XXXXX in respect of the XXXXX

e) the specified tax rate in the case at hand is XXXXX.

XXXXX.

Therefore, since all the requirements of paragraph 3(b) of the Regulations would be met, the XXXXX levy would be prescribed for purposes of section 154. By virtue of paragraph 154(2)(b), the prescribed provincial levy payable by the recipient would not be included in the consideration for the supply of the XXXXX. Accordingly, GST would not be applicable to the levy in the XXXXX that would be implemented under the XXXXX in respect of XXXXX.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9219.

Yours truly,

Ken Syer
Manager
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2007/05/09 — RITS 91750 — Implantable Prostheses - Section 25 of Part II of Schedule VI to the Excise Tax Act