1 August 1994 GST/HST Interpretation 1994-08-01 - Collection of GST on Duties Under the Special Import Measures Act

Dear XXXXX:

This is in response to your memorandum to Susan Mailer dated June 23, 1994, regarding the above-referenced subject.

The issue is whether GST with respect to SIMA duties can be collected from the "deemed importer" under SIMA, who is the person upon whom the SIMA duties are imposed. Under SIMA, the Deputy Minister makes a determination as to who is the person in Canada who is in reality the importer of the goods (i.e. the deemed importer).

In summary, in most situations there appears to be authority to collect GST from the deemed importer; it is a question of fact in which the circumstances of each situation would have to be considered.

Section 212 of the Excise Tax Act (ETA) imposes liability for payment of GST with respect to imported goods upon every person who is liable under the Customs Act to pay duty. Under section 215(1) of the ETA the value of the goods upon which GST is calculated is defined to include SIMA duties. To determine who is required to pay the GST with respect to the SIMA duties, section 212 of the ETA refers us to the Customs Act. This definition of duties includes duties levied under SIMA.

Under the Customs Act, several persons are potentially liable for customs duty and these persons would then be liable for payment of GST. Therefore, to determine whether the deemed importer under SIMA is liable to pay GST, we must consider whether that person would have been liable under the Customs Act to pay duties at the time of importation. This is a question of fact in each case.

There are two basic types of situations:

1. In the first situation, the deemed importer under SIMA is one of the persons to whom Customs could have looked for the payment of duties at the time of importation. It does not matter that Customs at the time chose to accept payment from one of the other persons, generally the importer of record. As long as there was a sufficient connection between the deemed importer and the transaction of importing the goods, then the deemed importer could be viewed as liable for duties under the Customs Act and therefore also liable for payment of GST. Agency relationships and certain contractual obligations would be examples of evidence of this connection.

2. In the second situation, the deemed importer under SIMA is sufficiently removed from the act of importing that there would be no liability under the Customs Act for duties. As the only obligation on this person would be imposed under SIMA, this person would not be liable for GST.

Our understanding is that the majority of cases fall within the first type of situation, i.e. the deemed importer under SIMA would also be a person who would have been liable to pay duties under the Customs Act. These persons would also be liable for payment of GST under Section 212 of the ETA.

Therefore, our view is that Customs may collect GST from the deemed importer under SIMA where that person would have been liable to pay duties under the Customs Act with respect to the importation of the goods in question. However, as the determination of potential liability under the Customs Act depends upon the facts of each transaction, it is difficult to state general criteria for determining liability under the Customs Act in order that those situations in which GST should not be collected from the deemed importer can be identified. For this reason, caution should be exercised in those rare instances of convoluted transactions in which the deemed importer appears to have no direct connection with the act of importing. In this situation, GST should generally not be collected from the deemed importer. We would be pleased to discuss particular fact situations in this regard, as required.

This interpretation is based upon our current understanding of the Excise Tax Act and regulations thereunder in their present form and does not take into account the effects of any proposed or future amendments thereto or future changes in interpretation.

Further, while we trust that our comments are of assistance to you, we would advise that they do not constitute a GST ruling and are, therefore, not binding upon the Department in respect of any particular fact situation.

If you have any questions or comments, please contact Mark Seigel of the Imports Unit at 952-1512.

Yours truly,

H.L. Jones
Director
General Tax Policy
Policy and Legislation
Goods and Services Tax

XXXXX