13 July 1994 GST/HST Interpretation 1994-07-13 - Service Supplied to

Attached is a copy of a letter dated January 27, 1994 (File: XXXXX), written by XXXXX to the above-referenced unregistered non-resident XXXXX[.] The letter concerns the application of the Goods and Services Tax (GST) to a service supplied to XXXXX by XXXXX, a registered non-resident.

I understand that XXXXX manufactured and supplied an underbody welding line to XXXXX XXXXX contracted with XXXXX to unload and install the underbody welding line at XXXXX Assembly Plant.

In his letter XXXXX discusses the drop-shipment provisions of subsection 179(2) of the Excise Tax Act (Act), as well as the possible application of either sections 232 or 261 of the Act as they relate to tax paid in error. However, XXXXX does not answer the question raised by XXXXX "Is the unloading and installation service supplied by IICC to XXXXX subject to the GST?"

In order for the drop-shipment provisions of subsection 179(2) to apply, there must be an agreement between a registrant and an unregistered non-resident for the supply of a commercial service in respect of tangible personal property (other than property of a person who is resident in Canada). The registrant must acquire physical possession of the property for the purpose of making a taxable supply of a commercial service in respect of the property to the unregistered non-resident.

There is an agreement between an a registrant XXXXX and an unregistered non-resident XXXXX[.] In addition, an unloading and installation service would be regarded as a commercial service. However, given the fact that both XXXXX and XXXXX are non-residents, and that XXXXX contract with XXXXX was to unload and install the underbody welding line at XXXXX Assembly Plant, it is likely that the property was shipped directly to the jobsite (i.e., XXXXX[)]. If this were the case, although XXXXX performed a commercial service, XXXXX would not have acquired physical possession of the property. As the property would have been shipped directly to XXXXX by XXXXX service would be in respect of property that was in XXXXX physical possession.

Consequently, the commercial service supplied by XXXXX to XXXXX may not be deemed to be made outside Canada pursuant to subsection 179(2).

In addit[i]on, as there are no zero-rating provisions which could apply (i.e., Schedule VI, Part V, paragraph 7(e) excludes a service that is in respect of tangible personal property that is situated in Canada at the time the service is performed), the unloading and installation service provided by XXXXX to XXXXX would be subject to the GST at 7%, with no provision for a rebate (i.e., section 261), or a refund or adjustment (i.e., section 232).

If you require any additional information, please contact Mr. Garry Ryhorchuk of my staff at (613) 952-6743.

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