12 January 1996 GST/HST Interpretation 11645-3[4] - Recovering the GST Paid on Goods Imported and Subsequently Exported

                                                                        11645-3(RMcK)

Dear Mr. XXXXX

I refer to your letter of December 8, 1995, concerning the possibility of your client recovering the GST paid on goods imported and subsequently exported.

We understand that your client is a non-resident non-registered importer of various materials into Canada. The imported goods include bottles, caps, labels, and ingredients. The materials are processed in Canada in accordance with XXXXX and then exported back to XXXXX[.]

Interpretation

Under section 212 of the Excise Tax Act the GST is imposed at the time of importation on imported goods whether or not the goods are subject to duty. The goods were properly imported and at time of importation were determined to be subject to the GST.

Section 213 of the Act provides for certain goods under Schedule VII to be non-taxable where they meet the terms and conditions mentioned in the schedule or the Non-Taxable Imported Goods (GST) Regulations pursuant to section 8 of the schedule. There are no relieving provisions for the goods under the legislation.

Section 215.1(1) provides for a rebate to be paid for returned goods where the goods were acquired by the person on consignment, approval, sale or return basis or other terms. A review of this importation would indicate that the importation did not qualify under any of these terms. Therefore, under this section a rebate is not payable to the importer. A rebate is also not payable to the importer under either of sections 215.1(2) or 215.1(3) since we are not dealing with damaged or defective goods.

Section 261 of the Act provides for the payment of a rebate where the tax was paid in error. At time of importation the goods were determined to be taxable and the tax was payable because the goods did not qualify under any of the relieving provisions in the Act . Therefore, a rebate is not payable under this provision as the tax on the imported goods was not paid in error.

While your client may not be entitled to a rebate under any of the above mentioned provisions of the Act, as the non-resident non-registered person your client may look to the flow-through provisions of section 180 of the Act. This provision allows registrants to recover by way of the input tax credit mechanism tax paid by unregistered non-residents on goods that are acquired by registrants for consumption use or supply in the course of a commercial activity or for the purpose of supplying a commercial service in respect of the goods.

Whether future importations of these goods would qualify for importation under the Inward Processing Program/Imports by Exporters of Processing Services Program as you suggest, is an issue which you may wish to explore with the local Customs/Excise office. As you are aware, this program is administered by Customs Trade Administration in conjunction with Excise District Offices and as such you may wish to make application to the office within the area where the importers are located to determine if the processors, goods and materials can qualify for the tax relief.

Thank you for bringing this issue to my attention. I hope that this information clarifies the issue for you. If you have any further concerns on this matter please contact Roy McKain at 952-4294 or Randy Nanner at 952-8810.

H.L. Jones
Director
General Applications Division
GST Rulings and Interpretations        Doc# 2627(Regl)