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Subsection 199(2)
11650-3 (pl)
Re: Acquisition of a Motor Home
Dear Mr. XXXXX
This is in reply to a request received from the Income Tax Rulings and Interpretations Directorate asking that we respond to your letters dated September 1, 1995, and December 5, 1995 concerning the input tax credit (ITC) entitlement under the Excise Tax Act (the "ETA") on the GST charged on the purchase of a motorhome.
Statement of Facts:
In your letter you provided the following facts to the Income Tax Rulings and Interpretation Directorate for our consideration:
• XXXXX commercial activity is to provide, among other things, demonstrations on XXXXX techniques throughout the XXXXX with the possibility of extending these services to XXXXX[.] For example, in 1994, XXXXX[;]
• With this in mind, XXXXX is considering the purchase of a motorhome which would permit XXXXX to travel to the work sites, demonstrate their XXXXX techniques and allow the XXXXX Instructor to eat and sleep in the motorhome without having to utilize hotel and restaurant facilities;
Your question is whether XXXXX would be entitled to claim an ITC (i.e. a GST refund) on the GST payable on the acquisition of the motorhome.
Department's Position:
In their letter dated March 20, 1996, the Business and General Division of the Income Tax Rulings and Interpretations Directorate indicated to you that a motorhome is not considered to be an "automobile" within its definition under subsection 248(1) of the Income Tax Act, but rather is a "motor vehicle" under that Act included in class 10(a) of Schedule II to the Regulations.
For GST purposes, since the motorhome is considered to be a "motor vehicle" under the Income Tax Act, the capital personal property rules provided under subsection 199(2) of the ETA will apply to determine whether a GST registrant is entitled to claim an ITC on the GST payable on the acquisition of the motorhome.
In general, paragraph 199(2)(a) of the ETA provides that where a GST registrant acquires or imports capital personal property to be used primarily (more than 50%) in the course of its commercial activities, the registrant is entitled to an ITC in respect of the GST payable on the property. Conversely, where the property is used otherwise than primarily in commercial activities, there is no ITC entitlement to the registrant. Furthermore, paragraph 199(2)(b) of the ETA says that where a registrant acquires or imports capital property with the intent of using it primarily in commercial activities, the person is deemed to use the property exclusively (100%) in commercial activities. Since the registrant is deemed to have used the property exclusively in commercial activities, the registrant is entitled to a full ITC on the GST payable on the property under subsection 169(1) of the ETA.
Having said this and based on the facts provided above, as long as XXXXX is registered for the GST and they intend to use the motorhome primarily in the course of their commercial activities, XXXXX will be entitled to claim an ITC equal to the total amount of GST payable on the purchase of the motorhome.
This interpretation is based upon our current understanding of the ETA and Regulations thereunder in their present form and does not take into account the effects of any 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 require further information, please contact Paul Lafond, Policy Officer, ITC and Co-ordination Unit at (613) 954-9700.
Yours truly,
H.L. Jones
Director
General Applications Division
GST Rulings and Interpretations
GAD #: 2841 (GEN)
| c.c.: |
M. Matthews
P. Lafond |
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