25 September 1998 GST/HST Ruling HQR0001045 - Grants and Subsidies

Dear Mr. XXXXX

Thank you for your letter of January 26, 1998, with attachments, which was forwarded to this office for reply. This letter concerned the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to facts described below.

Statement of Facts

Our understanding of the facts is as follows:

1. Human Resources Development Canada (HRDC) provides a Youth Internship Program under which they may make contributions to individuals and organizations to carry out approved projects to assist youth in making the transition from school to work.

2. Pursuant to this program, HRDC has entered into a contribution agreement with XXXXX who will act as the coordinator of XXXXX[.]

3. The agreement requires XXXXX to recruit, select, train and place individuals in jobs which provide the opportunity to gain work experience outside of Canada or in fields related to international marketing, manufacturing or research. They must also furnish HRDC with monthly progress and financial expenditure reports.

4. HRDC will provide contributions of up to XXXXX per youth to a maximum of XXXXX of the contributions will be used to cover youth related activities and XXXXX will go to XXXXX for administration.

5. One of the companies participating in XXXXX is the XXXXX[.] They have hired a student, XXXXX through a contract with XXXXX[.] The contract between XXXXX pays XXXXX[.] The term of this contract is XXXXX[.]

6. XXXXX will provide XXXXX for a period of XXXXX, to be used as a contract subsidy towards XXXXX service contract. If XXXXX employment continues through XXXXX, another XXXXX will be provided by XXXXX[.]

7. The contract between XXXXX also requires XXXXX to participate in program monitoring in order to track the progress of XXXXX work experience. This will be accomplished by way of follow-up phone calls and/or meetings.

Ruling Requested

Is the payment of a contract subsidy from XXXXX consideration for a supply and, therefore, subject to the GST.

Ruling Given

Based on the facts set out above, we rule that the contract subsidy from XXXXX is not consideration for a supply and, therefore, not subject to the GST.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to departmental interpretative policy; and that you have fully described all necessary facts for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9218.

Yours truly,

Brent Fleming
Governments Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate