4 April 2007 GST/HST Ruling 53583 - Government funding

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 interaction of sections 6, 7 and 8 of Part III of Schedule V to the Excise Tax Act (ETA). We apologize for the delay in our response.

All legislative references are to the ETA and the regulations therein, unless otherwise specified.

We understand that you have some concerns regarding an interpretation of the interaction between sections 6, 7 and 8 of Part III of Schedule V XXXXX.

Interpretation Requested

You would like to confirm that

•   Sections 6 and 8 of Part III of Schedule V to the ETA cannot be overridden by section 7 of that same Part;

•   Goods and Services Tax (GST)/Harmonized Sales Tax (HST) registrants may elect under section 6 to render supplies taxable without filing a second election under section 8; and

•   The Canada Revenue Agency (the CRA) will provide administrative relief to registrants by acknowledging that an election filed under section 6 or 8 will be deemed to have been made under either section.

Interpretation Given

It is the CRA's view that an election under section 6 or 8 of Part III of Schedule V can be overridden by the exemption under section 7 of Part III of Schedule V provided the particular supply falls within the requirements of section 7. The term "exempt supply" is defined in subsection 123(1) as a supply included in Schedule V. The CRA interprets Schedule V as a list of exempt supplies that must be considered and applied independently. As it is possible that a supply may meet the requirements of more than one section in Schedule V, all sections in Schedule V must be examined when determining if a particular supply is exempt.

The wording found in sections 6 and 8 is clear and precise; the supply is exempt "except where the supplier has made an election under this section" (emphasis added). The election under either section 6 or 8 is just that, an election under a specific section. It is not to the exclusion of all other possible exempting provisions in Schedule V as was clearly stated by the Department of Finance in 2000. When the Department of Finance amended section 8 of Part III of Schedule V in 2000 the explanatory notes they issued indicated that a supply for which an election had been made would remain exempt if another provision applied. The explanatory notes for that amendment state:

"As well, the amended provision provides an authority for suppliers to elect not to have their supplies exempted under this section. Where the election is made by a supplier in prescribed form containing prescribed information, supplies that would otherwise be exempt under the section made by the supplier will be taxable (assuming the supplies are not covered by another exempting provision)." (emphasis added)

If a particular supply meets the requirements of both section 6 and 8 of Part III the supplier must make an election under both sections to ensure that the supply will not be exempt under either of these sections. Even where an election is made under section 6 and/or 8, the supply will remain exempt if it meets the requirements of another section in Schedule V, for example, section 7 of Part III or section 1 of Part V.1 of Schedule V.

The CRA is not prepared to take an administrative position that an election made under section 6 will also apply for the purposes of section 8. Although a single form may be used to file the elections, the ETA and the form are clear that there are two separate elections that have different criteria and different persons who may elect.

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 CRA 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) 954-4206.

Yours truly,

Carol A. Gaudet
Charities, Non-profit organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2007/03/30 — RITS 81675 — Input Tax Credit Entitlement for High-Rent Ski Condo