File: 11995-1
Doc.: 113
I refer to your letter of April 14, 1994, in which you inquired about the application of the goods and services tax (GST) to the rental and related demurrage charges on compressed gas cylinders.
From the telephone conversation with a member of my staff, namely, Tony D'Abramo, I understand that your sale of industrial gas includes the free use of the cylinders containing the gas for 30 days. You charge a penalty or fee for cylinders not returned after 30 days (i.e., a demurrage charge). The penalty charge is shown on the subsequent invoice for the next purchase of gas. To date you have not charged GST on the charge for the cylinders not returned.
Section 162.1 of the Excise Tax Act provides that any demurage charge and any penalty for delay in returning rolling stock will not be subject to GST by deeming the charge or penalty not to be consideration for a supply. Consequently, demurrage charges are outside the scope of the GST. The penalty charge for cylinders not returned after 30 days is an amount in respect of demurrage and therefore is not subject to the GST.
If you have any questions or comments, please do not hesitate to contact Mr. Tony D'Abramo, Manager, Services Unit, at (613) 952-9209.
Yours truly,
J.A. Venne
Director
Tax Policy - Special Sectors
GST Policy and Legislation
Email this Content