12 March 2000 GST/HST Ruling 99704 - GST Treatment ofXXXXX Cards as Coupons

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 supply of packages by XXXXX.

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

Effective January 1, 2008, the rate of the GST has been reduced from 6% to 5% and the rate of HST from 14% to 13%. The new rates apply to supplies for which the GST/HST is paid on or after January 1, 2008, 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 GST/HST Notice 226, GST/HST Rate Reduction in 2008 on the Canada Revenue Agency (CRA) Web site at www.cra-arc.gc.ca/E/pub/gi/notice226/README.html.

We understand that as part of its tour operations, XXXXX offers a line of packages including train packages. You would like confirmation of your understanding of the application of GST/HST to these packages.

Interpretation Requested

You would like confirmation that, with respect to calculating the GST/HST on a tour package, property and services provided outside of Canada are included in the zero-rated portion of the tour package.

You would also like to confirm that short-term accommodation outside of Canada is not "short-term accommodation" for the purposes of the Foreign Convention and Tour Incentive Program (FCTIP).

You would like to know if a package that includes an overnight train component is eligible for the tour package rebate under the FCTIP? Does it make a difference if the train component is a seat on the train, or a bed or berth in sleeper class?

Interpretation Given

Calculating GST/HST on tour packages

You are correct in your understanding that property and services provided outside of Canada are included in the zero-rated portion of a tour package when calculating the GST/HST on a tour package.

A tour package is a single supply of a service for GST/HST. However, a tour package may include property and services that would be taxable at different rates (i.e., 0%, 5%, or 13%) if supplied separately and not as part of a tour package. It may also include property and services that, if supplied separately, would be exempt or provided outside Canada and not subject to tax.

To determine the amount of GST/HST to charge, suppliers of tour packages that include a combination of taxable and non-taxable property and services must pro-rate their selling prices, according to section 163, based on the value of taxable and non-taxable property and services in the package.

Generally, taxable property and services are those property and services included in a tour package which, if supplied separately, and not as part of a tour package, would be subject to GST/HST (other than zero-rated supplies). The taxable portion is further divided into:

•   the non-provincially taxable portion, which is subject to the 5% GST, and

•   the provincially taxable portion, which is subject to the 13% HST.

The non-taxable portion of a tour package refers to any part of the tour package that is not included in the taxable portion of the tour package. The non-taxable portion of a tour package includes any property or service included in the tour package that, if supplied separately, and not as part of the tour package, would be zero-rated or exempt supplies, or supplies not subject to tax.

The non-taxable portion of a tour package is a zero-rated supply pursuant to section 1 of Part VI of Schedule VI.

More information on calculating the GST/HST on tour packages can be found in GST/HST Memorandum 27.1, Zero-Rated Travel Services.

FCTIP

The FCTIP, a new rebate program that replaced the Visitor Rebate Program, came into effect April 1, 2007. The FCTIP continues to provide GST/HST relief to non-residents for:

•   all of the GST/HST paid on accommodation sold to non-resident tour operators that are not registered for the GST/HST and that include the accommodation in eligible tour packages sold to non-residents, and

•   generally 50% of the GST/HST paid on eligible tour packages that are sold to non-resident consumers and non-resident organizations or businesses that are not registered for the GST/HST, including tour operators.

The rebate calculation for eligible tour packages is based on the number of nights of short-term and/or camping accommodation in Canada included in the package. More information on calculating the tour package rebate can be found in GST/HST Info Sheet GI-032, Non-Residents Purchasing Tour Packages: Rebate for Eligible Tour Packages.

Eligible tour packages

Under the FCTIP, non-residents are able to get a GST/HST rebate on eligible tour packages that they purchase. An eligible tour package for the purposes of the FCTIP is a tour package that includes short-term and/or camping accommodation in Canada and at least one service, and it must be sold for an all-inclusive price.

Short-term accommodation

You are also correct in your understanding that short-term accommodation outside of Canada is not "short-term accommodation" for the purposes of the FCTIP.

Short-term accommodation is defined in subsection 123(1) and means the rental of an accommodation unit as a place of lodging for an individual who will occupy it continuously for a period of less than one month.

For the purposes of the FCTIP, short-term accommodation includes any type of overnight shelter that is part of a tour package that has food and the services of a guide. However, short-term accommodation does not include shelter on a train, trailer, boat or structure that is, or could be, self-propelled. It also does not include the rental of an accommodation unit when it is supplied under a timeshare arrangement or when it is included in the part of a tour package that is the non-taxable portion of the tour package.

Therefore, no GST/HST would be charged on the portion of a tour package that includes short-term accommodation provided outside of Canada as this accommodation is included in the non-taxable portion of the tour package and is not part of the definition of "short-term accommodation" for the purposes of the tour package rebate under the FCTIP.

Also included in the non-taxable portion of a tour package, and thereby excluded from the definition of short-term accommodation, is the rental of an accommodation unit for $20 or less per night; a supply that, if supplied separately, is exempt pursuant to section 6 of Part I of Schedule V.

Packages including train transportation

Generally, transportation by train is a transportation service and not short-term accommodation for GST/HST purposes, regardless of whether the passenger occupies a seat on the train or travels by sleeper class in a bed or berth. This is the case even where the transportation includes one or more overnight stays on the train.

Whether or not a tour package that includes train transportation is an eligible tour package will depend on the facts of the particular situation. The tour package must meet the definition of an eligible tour package.

For example, a tour operator supplying a tour package for an all-inclusive price that is comprised of hotel accommodation in Canada and train transportation, including an overnight stay on the train, is supplying an eligible tour package for GST/HST purposes. The tour package includes short-term accommodation (the hotel accommodation) in Canada and a service (the train transportation).

Alternatively, a tour operator supplying a tour package for an all-inclusive price that is comprised of overnight train transportation, meals and a guided tour is not an eligible tour package for purposes of the tour package rebate under the FCTIP. There is no short-term accommodation in Canada included in the tour package.

All of the publications referred to in this letter may be found on the CRA Web Site at www.cra-arc.gc.ca/formspubs/type/menu-e.html.

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) 954-2488.

Yours truly,

Carla Schur-Ellison
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2008/03/27 — RITS 103195 — XXXXX Cereal and XXXXX Cereal