File #: 11640-3(glr)
Re: Customs Bonded Warehouse Program
I refer to your meeting last month with Messrs. Randy Nanner and Garry Ryhorchuk of my staff, concerning various services performed in a bonded warehouse. The services relate to tangible personal property (TPP) supplied domestically to residents and non-residents and TPP imported by residents and non-residents.
As requested, attached are examples dealing with the treatment of these services for Goods and Services Tax (GST) purposes.
If you have any questions or require further information, please contact Mr. Ryhorchuk at 952-6743 or Mr. Nanner at 952-8810.
H.L. Jones
Director
General Applications Division
GST Rulings and Interpretations
Policy and Legislation Branch
Attachment
| c.c.: |
R. Nanner GAD #: 2785(GEN)
G. Ryhorchuk |
CUSTOMS BONDED WAREHOUSE PROGRAM
Example #1
Goods are temporarily imported into Canada for storage purposes. The goods are stored in a Customs bonded warehouse. The importer may be a resident or a non-resident. After three months, the goods are exported back to the United States.
The storage service supplied by the GST-registered bonded warehouse operator to the importer is zero-rated, i.e., subject to the GST at 0%, under the provisions of Schedule VI, Part V, section 4 to the Excise Tax Act.
Example #2
A GST-registered resident ships domestic goods to a Customs bonded warehouse for storage purposes (or for any other commercial service). After two months, the goods are either exported to the United Kingdom or shipped to domestic customers of the resident.
The storage service (or other commercial service) supplied by the GST-registered bonded warehouse operator is subject to the GST at 7% under Division II. The registered resident would be able to claim an input tax credit for the GST paid or payable to the extent that the service was acquired for consumption, use or supply in the course of the resident's commercial activities.
Example #3
A non-resident, who is not registered for GST purposes, purchases goods from several GST-registered residents. On the instructions of the non-resident, the residents ship the goods to a Customs bonded warehouse. The goods are repackaged in the bonded warehouse and then exported from Canada. The individual items lose their identity following the repackaging operation (i.e., the repackaging has resulted in a new product).
The operator of the bonded warehouse is considered to have supplied a "service of manufacturing or producing tangible personal property" to the non-resident. Provided the non-resident is not a consumer and the property is exported directly from Canada, the repackaging service supplied the bonded warehouse operator is deemed to be made outside Canada under the provisions of subsection 179(3) of the Excise Tax Act and, as a result, not subject to the tax under Division II.
Example #4
A non-resident, who is not registered for GST purposes, purchases goods from several GST-registered residents. On instructions of the non-resident, the goods are shipped to a Customs bonded warehouse. The goods are repackaged in the bonded warehouse, stored and subsequently delivered in Canada to customers of the non-resident. The customers are registered for GST purposes.
Provided the GST-registered customers furnish drop-shipment certificates to the bonded warehouse operator, the repackaging service supplied by the operator to the non-resident will be deemed to be made outside Canada under the provisions of subsection 179(2) of the Excise Tax Act and thus not subject to the tax under Division II. The storage service is subject to the GST at 7% under Division II.
Example #5
A non-resident, who is not registered for GST purposes, purchases goods from several GST-registered residents. On instructions of the non-resident, the goods are shipped to a Customs bonded warehouse. The goods are repackaged in the bonded warehouse, stored and subsequently delivered in Canada to customers of the non-resident. The customers are not registered for GST purposes (e.g., consumers).
The repackaging service supplied by the operator to the non-resident is subject to the GST at 7% under Division II (the tax is calculated on the fair market value of the goods at the time they are sold). The storage service is subject to the GST at 7% under Division II (the tax is calculated on the charge made for the service).
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