12 November 1998 GST/HST Interpretation HQR0001360 - Section 254 Rebate on Contractor Built Home

Dear Ms. XXXXX

We are writing in response to your memorandum with attachments dated September 29, 1998 concerning the availability of a GST/HST new housing rebate under section 254 of the Excise Tax Act (Act) to an applicant who hired a contractor to build a house on the applicant's land.

Facts

The facts as we understand them are based upon the memorandum of September 29, 1998 and upon a follow up conversation with you on October 22, 1998 and are as follows:

1. An individual purchased a parcel of land through a real estate agent. He then hired a contractor to build a house for him on the newly acquired property.

2. The home was substantially completed and occupied in 1995, but the applicant waited until 1998 to file a claim for the GST/HST new housing rebate in order that he might include certain additional costs that he incurred in finishing his basement. The contractor had advised the applicant that he had four years to file his claim.

3. The applicant has missed the filing deadline to apply for a GST/HST new housing rebate under section 256 of the Act. The deadline was amended in 1996, but those amendments do not apply to this applicant because the building was substantially completed in 1995. However, the applicant has not missed the deadline to file an application, if he was eligible, under section 254 of the Act.

Interpretation Requested

Is the applicant entitled to file an application for a GST/HST new housing rebate under section 254 of the Act, notwithstanding the fact that he hired a contractor to build a house on land that he already owned rather than buying a residential complex (building and land) from a builder.

Interpretation Given

Based on the information provided the applicant is not entitled to obtain a rebate under section 254 of the Act.

Analysis

The applicant fails to meet several of the conditions that are set out in subsection 254(2) of the Act.

Paragraph 254(2)(a) of the Act is not satisfied because the contractor does not make a supply by way of sale of the residential complex. The contract in question is a contract for the supply of construction services and not a contract for the supply of a residential complex. The contractor owns neither the land, nor the work in progress.

Since the agreement in question is an agreement for the supply of construction services and not an agreement for the purchase and sale of a residential complex, the requirement in paragraph 254(2)(b) that there be an assumption of liability under an agreement of purchase and sale of the complex cannot be satisfied.

Finally, paragraph 254(2)(e) is not satisfied because there is no transfer of ownership of a residential complex to the purchaser after the residential complex is substantially completed. In this case the purchaser owns the land, and merely acquires goods and services.

The failure to meet the foregoing conditions precludes the applicant from claiming a GST/HST new housing rebate under section 254 of the Act.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-4393.

Yours truly,

Michael Ezri
Real Property Unit
Financial Institutions & Real Property Division
GST/HST Rulings and Interpretations Directorate