1 August 1996 GST/HST Interpretation 11895-1[5] - Entitlement of a Para-municipal Organization to Claim Input Tax Credits

I refer to the E-Mail of November 28, 1994, from XXXXX of your office addressed to Mr. Gunar Ozols of General Applications Division, GST Rulings and Interpretations. In his submission, XXXXX sought assistance on an issue involving the Commission's entitlement to claim input tax credits (ITC's), pursuant to subsection 141(1) of the Excise Tax Act (the Act). As the issue relates to a para-municipal organization, I have been asked to respond to this request. I apologize for the delay in replying to your request.

Facts

1. The Commission, determined as a municipality pursuant to paragraph (b) of the definition of municipality in subsection 123(1) of the Act, is defined as a para-municipal organization of a municipal body in section 1 of Part VI of Schedule V to the Act.

2. The Commission purchases XXXXX from XXXXX at a XXXXX that is XXXXX for the purposes of making supplies of XXXXX to its customers. Once the XXXXX is reduced to a XXXXX (i.e., transformed), the Commission supplies the XXXXX to households, businesses, and municipalities, including para-municipal organizations.

3. The Commission makes exempt supplies of XXXXX to the municipal body and para-municipal organizations of the municipal body under section 28 of Part VI of Schedule V to the Act.

4. The Commission also makes taxable supplies XXXXX[.]

Question

The Commission uses the XXXXX it acquires from XXXXX to make both taxable and exempt supplies XXXXX[.] Pursuant to subsections 141(1) and 169(1) of the Act, is the Commission entitled to claim full ITC's for the GST incurred on the acquisition XXXXX[.]

Response

Under subsection 141(1), where substantially all of the consumption or use of property by a person is in the course of the person's commercial activities, all of the consumption or use of the property by the person shall be deemed to be in the course of those activities. It is our opinion that the XXXXX acquired from XXXXX is used by the Commission when it is stepped down XXXXX into XXXXX XXXXX[.] Therefore, subsection 141(1) will only apply where the Commission can provide evidence that substantially all of the use of the acquired property or service of the commission is used in the course of the Commission's commercial activities.

Should you have any questions, please contact Ms. Joanne Houlahan, Manager, Public Service Bodies at (613) 954-7945 or Mr. Owen Newell, Policy Officer, Municipalities at (613) 954-4280.

Yours truly,

J.A. Venne
Director
Special Sectors
GST Rulings and Interpretations