Telephone #: (613) 954-5124
Fax #: (613) 990-1233
11645-3 (crl)
Sch. VII/8
This is in response to your facsimile dated May 13, 1996, and a telephone conversation on June 25, 1996, concerning the application of the Goods and Services Tax (GST) to Canadian goods returned to Canada.
In your facsimile and a subsequent telephone conversation, you indicated that geophysical instruments (instruments), which are manufactured in Canada, are being leased in Canada to a non-resident company for their use outside of Canada. When the lease expires or the work is completed, the instruments will be returned to the supplier in Canada. The Canadian supplier will maintain ownership of the instruments while they are outside Canada and will be responsible for importing the instruments when they are returned to Canada.
The tax treatment to be accorded to imported goods considered to be Canadian goods and goods once accounted for, exported and returned was outlined in the Department of Finance Press Release dated December 18, 1990. Until such time as the Non-taxable Imported Goods (GST) Regulations are amended to incorporate the changes announced in the Department of Finance Press Release, reference is made to the administrative procedures in Customs Notice 973 dated July 10, 1995.
Since that announcement, the Department of Finance has clarified the policy pertaining to the application of the GST to Canadian goods returned to Canada. This clarification will apply effective January 1, 1991. Goods of Canadian origin, or goods that have been previously accounted for, which have been exported from Canada and are being returned are relieved of the GST at time of importation unless they were
(a) supplied outside Canada (either by sale, or by lease, licence or other similar arrangement);
(b) supplied in Canada for export under conditions resulting in zero-rating of the supply under Part V of Schedule VI; or
(c) supplied to a non-resident recipient who was entitled to claim a rebate of the GST paid on the goods under subsection 252(1).
With respect to goods which are being returned to Canada after having been supplied in Canada for export by way of lease, licence or similar arrangement, it should be noted that it is not the intention of the policy to tax goods that are returning to Canada under certain circumstances. If goods are exported by the owner of the goods for lease or rental outside Canada and are being re-imported by the owner at the end of the rental or lease term, the goods will not be subject to the GST. However, if any person other than the owner imported the goods into Canada, the GST would apply to the goods at time of importation.
From the information contained in your facsimile and in a subsequent conversation, it appears as if the instruments are being supplied in Canada pursuant to paragraph 142(1)(b) of the Excise Tax Act (Act) for export and would be zero-rated providing the instruments met all of the conditions listed in section 1 of Part V of Schedule VI to the Act.
The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed or future amendments to the legislation may result in changes to our interpretation. These comments are not rulings and, in accordance with the guidelines set out in GST Memoranda Series Section 1.4, do not bind the Department with respect to a particular situation.
If you have any questions or require additional information, please contact Cheryl Leyton at (613) 954-5124 or Randy Nanner at (613) 952-8810.
H.L. Jones
Director
General Applications Division
GST Rulings and Interpretations
Policy and Legislation Branch
GAD # 2971 (Genl)
| c.c.: |
R. Nanner
C.R. Leyton |
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