5 March 1992 GST/HST Interpretation 1992-03-05 - Application of the GST to Repair Parts Imported Into Canada for Use on Foreign-based Aircraft Engaged in the International Commercial Transportation of Passengers or Goods

Dear XXXXX

In your letter of April 23, 1991 you asked if repair parts imported into Canada for use on foreign-based aircraft engaged in the international commercial transportation of passengers or goods were subject to the Goods and Services Tax (GST).

This letter supersedes the information in our letter dated August 16, 1991, provides further clarification of the treatment of imported parts for use in the repair of aircraft for purposes of the GST and the definition of "goods" for purposes of paragraph 3(d) of the Non-Taxable Imported Goods (GST) Regulations.

With respect to the tax status of aircraft parts which are being imported for use in the maintenance, overhaul or repair of the aircraft, paragraph 3(d) of the Non-taxable Imported Goods (GST) Regulations, made pursuant to Section 213 and section 8 of Schedule VII to the Act, prescribe certain goods and the circumstances under which they may be imported into Canada without payment of the GST as follows:

d) goods imported for the sole purpose of maintenance, overhaul or repair of those goods in Canada, where

(i) neither title to nor beneficial use of the goods is intended to pass and does not pass, or passes to a person in Canada while the goods are in Canada, and

(ii) the goods are exported as soon after the maintenance, overhaul or repair is completed as is reasonable having regard to the circumstances surrounding the importation and, where applicable, to the normal business practice of the importer

The definition of goods for purposes of paragraph 3(d) would include "parts" which are being imported temporarily for the purpose of being repaired, maintained or overhauled in Canada, but does not include parts imported for use in the repair, maintenance or overhaul of other goods. Thus a damaged aircraft engine imported to be repaired in Canada and then exported would qualify under this provision and thus would be non-taxable at time of importation. However, aircraft engine parts imported for use in the repair, maintenance or overhaul of the engine would be subject to the tax when imported. Similarly, an engine imported to be installed onto an aircraft as a replacement engine would not qualify under this provision and would be taxable at time of import.

Goods supplied as replacement parts under a warranty are non-taxable under Section 5 of Schedule VII to the Act, providing the conditions outlined in that section of the Schedule are met.

Aircraft parts and furnishings imported by a Canadian company for use in the maintenance, overhaul and repair of foreign based conveyances would be taxable at time of importation. The Canadian company, as a registrant would be entitled to claim input tax credits for this tax to the extent that the goods were for use in the Canadian company's commercial activity.

On March 27, 1991, the Minister of Finance announced that the Act will be amended to permit a registrant who imports another person's goods for the purpose of manufacturing, processing, inspecting, testing, evaluation, repair or maintenance service, to claim an ITC for the tax paid on the imported goods to the extent the service is provided in the course of the registrant's commercial activity. I have attached, for your information, a copy of the Press Release containing additional details relating to the announcement.

You should also be aware that the supply of a property or service to an unregistered non-resident carrier, may be zero-rated providing the conditions outlined in section 2 of Part V of Schedule VI are met.

This interpretation is based on our current understanding of the Excise Tax Act (the Act) and Regulations thereunder in their present form and do 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.

A copy of this letter has been forwarded to Customs and to all Regional Excise Tax Offices to make them aware of this policy clarification.

Yours sincerely,

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

G.T.P. 1677 (REVISED)

Attachments: March 27, 1991 Information News Release Department of Finance

Non-Taxable Imported Goods (GST) Regulations SOR/91-31 18 December, 1990

c.c.:      XXXXX
Please advise all concerned. GST-exemption code 66 will still
continue to apply but only to those goods which satisfy the conditions
of this interpretation.