8 April 2005 GST/HST Interpretation 59344 - PROPOSED LAW/REGULATION

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.

This is further to a XXXXX telephone enquiry from XXXXX of your office concerning the subject matter.

XXXXX I advised XXXXX that the response to his enquiry would be forthcoming in writing. Because the issue of his enquiry had not been previously raised, it was decided that it would be best to have his enquiry cased up to ensure that our response could be uploaded to RITS for accessibility by all GST/HST Rulings offices.

Facts

An Indian band is acquiring repair services for appliances located in an off-reserve housing project that it owns and operates. The Indian band supplies the housing by way of lease. The operation of the housing project has been determined to be a band management activity, as defined in Technical Information Bulletin B-039R, GST Administrative Policy - Application of GST to Indians (B-039R).

Issue

Is the Indian band entitled to acquire on a tax-relieved basis under B-039R repair services for appliances located in an off-reserve housing project that it owns and operates?

Position

The Indian band is entitled to acquire on a tax-relieved basis under B-039R repair services for appliances located in an off-reserve housing project that it owns and operates provided the appliances are not built-in. Generally, an appliance is considered to be built-in when it is plumbed in and/or hard-wired to the real property.

Explanation

B-039R states "Services acquired on or off reserve by an Indian band or band-empowered entity for band management activities or for real property on reserve are not subject to GST."

The phrase "for band management activities or for real property on reserve" is to be read as one. Therefore, tax relief on services for real property is only provided to Indian bands and band-empowered entities if the real property is on a reserve. All services acquired for real property off a reserve are subject to GST/HST.

For purposes of B-039R, the determination of whether a service is "for real property on reserve" is a question of fact. In establishing whether an appliance can be considered to be for real property, we looked to the definition of real property in subsection 123(1) of the Excise Tax Act (ETA). Generally, real property includes items that are attached to land, such as buildings, utility poles, fences and chattels that have been attached to real property (i.e., fixtures). The Canada Revenue Agency has taken the position that an appliance will be considered to be part of the real property if it is a "fixture".

Generally, for an appliance to be considered a fixture, it must be built-in (i.e., plumbed in and/or hard-wired to the real property). Once the appliance is attached or installed, it must become part of the real property such that it is intended to remain as a permanent part of the real property that cannot be easily removed.

A washing machine would not be considered to be part of the real property because its plumbing can be easily attached and unattached. A built-in dishwasher, on the other hand, would be considered to be part of real property. In this regard, you may find Chapter 19.1 of the GST/HST Memoranda Series and a letter issued by the Real Property Unit XXXXX useful. XXXXX.

In the case at issue, the determination of whether an Indian band is relieved from the payment of GST/HST on the purchase of repairs services for an appliance located in a housing project off a reserve is therefore dependent upon whether or not the appliance is a fixture forming part of the real property or not.

For example, if the appliance in question is a built-in dishwasher, the Indian band would not be entitled to tax relief on the acquisition of a repair service since the service would be seen as being for real property located off a reserve. The Indian band would be entitled to a public service body (PSB) rebate in respect of the GST/HST paid on the acquisition of the repair service provided that it is an eligible PSB. If the repair service were for a washing machine that is not a fixture, however, the Indian band would be entitled to acquire the service tax-relieved. As a washing machine is not a built-in appliance, the service would not be seen as being for real property located off a reserve.

It should be noted that if parts are supplied together with the repair service and the consideration for the parts is separately broken down on the invoice, GST/HST would apply to the parts when acquired for both built-in or stand-alone appliances unless the parts are delivered to a reserve, as required by B-039R. This position is consistent with that taken on vehicle repair services acquired by Indians, Indian bands and band-empowered entities.

If you would like to discuss this issue further, please call me at 954-7952.

2005/04/11 — RITS 59714 — Temporary Importation of Amusement Rides