26 April 1994 GST/HST Interpretation 11894-5-5 - Application of the GST to Supplies Relating to Water

This refers to your facsimile dated April 16, 1992, and attached correspondence, concerning the application of the GST to payments made by the XXXXX to the XXXXX for the taking of water from the XXXXX[.]

We have reviewed the agreement between the two parties and based on the terms of the agreement have determined that the Authority is supplying a "right" to take water from the XXXXX rather than water. In these circumstances the provisions of section 162 of the Excise Tax Act apply and the GST should not be paid on the payments made by the XXXXX to the XXXXX[.]

I discussed this matter with a Mr. XXXXX, to obtain more information but did not advise him of the application of the GST as this matter was still under review by us at that time. Based on my conversation with him it appears that the XXXXX may have similar arrangements with other customers, such as XXXXX for example, and that it may have been charging tax to these customers as well. Because of the many changes regarding the application of the GST to water and the Authority's apparent misunderstanding of how the GST applies, it would appear necessary that the Authority be advised of the application of the GST to all their supplies relating to water.

Thank you for bringing this matter to our attention. If you require further information regarding this issue please advise.

Neil Minken
Special Sectors
Policy and Legislation Excise/GST