6 February 1997 GST/HST Interpretation HQR0000026 - Indian Housing

                                                                        HQR0000026

                                                                        File No.: 11872-1

Dear XXXXX:

Thank you for your enquiry of February 21, 1996, concerning the definition of band management activities, specifically if the construction of Indian housing by an Indian band or a band-empowered entity is a band management activity.

The GST administrative policy pertaining to Indians, published in Technical Information Bulletin B-039R, defines band management activities as those activities for which the band or band empowered entity is not entitled to claim an input tax credit. A band or band empowered entity, as any other registrant, is entitled to claim an input tax credit for GST paid on their commercial activities.

Section 123 of the Excise Tax Act (ETA), provides that the commercial activity of a person means "... (c) the making of a supply (other than an exempt supply) by the person of real property of the person, including anything done by the person in the course of or in connection with the making of the supply". However, pursuant to subsection 240(1) every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is required to be registered, except where the person is a small supplier or where the only commercial activity of the person is the making of supplies of real property by way of sale otherwise than in the course of a business or where the person is not resident in Canada. Pursuant to subsection 148(1) of the ETA, for purposes of determining whether a person is a small supplier, a person is not required to include, among other things, the supply by way of sale, including deemed self-supplies of capital property of the person, including capital real property. Therefore, a builder will not be required to register because of the self-supplies of real property.

If the band or band-empowered entity is not a registrant, as a non-registrant they will not be entitled to an input tax credit; therefore, the housing activities will fall within the definition of a band management activity. However, if the band or band-empowered entity is a registrant or becomes a registrant they would be eligible to claim full ITCs for GST paid or payable on costs related to the construction of the residential complexes, pursuant to subsection 169(1) of the ETA; therefore, the activity would not qualify as a band management activity.

The band or band-empowered entity, whether or not they are a registrant, will be required to account for the GST on the self-supply, at the fair market value, of the residential complexes, as follows:

for the single unit residential complexes, at the later of the time the construction or renovation is substantially completed and the time possession is given to another person under the rental agreement, beginning January 1, 1991; and for the multiple unit residential complexes, the self-supply of the entire complex at the time the first unit is rented out, beginning January 1, 1991.

The self-supply of the residential complexes will be tax-relieved under the provisions of the GST administrative policy pertaining to Indians if the person required to self-supply is an Indian, Indian band or band-empowered entity and the residential complex is located on a reserve. Therefore, although a self-supply occurs, no GST will be remitted.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed or future amendments to the legislation may result in changes to our interpretation. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST Memoranda Series, do not bind the Department with respect to a particular situation.

Should you have any further questions or require clarification on the above or any other Excise/GST matter, please do not hesitate to contact me at (613)954-7954.

Yours truly,

Jamie McInnis
A/Senior Tax Policy Officer
Public Service Bodies and Governments
GST Rulings and Interpretations