Telephone No.: (613) 957-8224
Fax No.: (613) 990-3602
File No.: 11640-3(cav)
Sch. VI/V/6
June 10, 1996.
Dear XXXXX
I refer to your letter dated May 24, 1996 in which you requested clarification of the application of section 6 of Part V of Schedule VI of the Excise Tax Act (the Act) and proposed section 6.1 as it was announced in the Notice of Ways and Means Motion tabled on April 23, 1996. Both provisions concern the application of the Goods and Services Tax (GST) to emergency repair services supplied to non-residents.
You state that:
XXXXX and XXXXX are non-railway companies engaged in the business of leasing railway rolling stock (RRS) to various companies in Canada. Their fleets are constituted of tank and freight cars. These tank cars are used for the shipment of liquids such as petroleum product, chemicals, food and vegetable oils and other industrial liquids. Other specialized railcars, called hopper cars, are used for the transportation of potash, plastic pellets, sodium chlorate and other bulk commodities.
In the normal course of business these companies are required, under the XXXXX rules, to perform prescribed repair operations.
Up to XXXXX of emergency repairs charged to third parties are invoiced to non-residents.
Interpretation Given
As you were advised in my letter of June 21, 1995, the Department interprets section 6 to mean that the person making the supply of the emergency repair service must be a carrier (a carrier is in a business of transporting passengers or goods). Confirmation of this interpretation is contained in the example in paragraph 84 of GST Memorandum 300-3-5 (Exports).
We understand that your clients are essential members of the transportation industry and emergency repairs of RRS are imposed on them pursuant to the XXXXX rules. However, the fact remains that your clients are not engaged in a business of transporting passengers or goods. Therefore, the emergency repair services provided by your clients prior to April 24, 1996 were not zero-rated under the provisions of Schedule VI, Part V, section 6.
Effective April 24, 1996, proposed section 6.1 zero-rates supplies made to unregistered non-residents of emergency repairs to railway rolling stock. In addition, repair parts supplied in conjunction with this service are also zero-rated. Any change in the effective date of proposed section 6.1 is the responsibility of the Department of Finance.
The foregoing comments represent our general views with respect to the current legislation and proposed amendment to the Act relating to the subject matter of your letter. These comments are not rulings and, in accordance with the guidelines set out in Section 1.4 of the GST Memoranda Series, do not bind the Department with respect to a particular situation.
Should you require further clarification, please do not hesitate to contact Carol Ann Villeneuve at (613) 957-8224 or Randy Nanner at (613) 952-8810.
Yours sincerely,
H.L. Jones
Director
General Operations and Border Issues
GST Rulings and Interpretations
Policy and Legislation
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