28 September 1998 GST/HST Interpretation HQR0001218 - Zero-rating of an Exempt Portion of a Tour Package

This refers to an E-mail message dated May 11, 1998, XXXXX TIS office concerning a decision issued on case (HQR0000920).

The case cited above concerned the GST treatment of an exempt portion of a tour package and more specifically whether the zero-rating provisions in Schedule VI to the Excise Tax Act ("the Act") overrode the exempting provisions in Schedule V to the Act. After consideration of the facts, the Department determined that the portion of the tour package relating to accommodation supplied to the Japanese tourists maintains its exempt status and the zero-rating provisions in Part VI of Schedule VI to the Act do not apply. After removing the exempt portion of the tour package, it would then be appropriate to consider the tax status of the remaining portions of the package.

XXXXX disagreed with the Department's decision and forwarded an E-mail to us requesting the Department reconsider the decision. After a careful review of this case, I must admit that I can find nothing wrong with the information and decision contained in HQR0000920. However, although the decision is correct, it might have added additional information concerning the treatment of a tour package which includes long term accommodation.

According to the definition of tour package in subsection 163(3) of the Act, a tour package is a combination of two or more services, or of property and services, that includes transportation services, accommodation, a right to use a campground or trailer park, or guide or interpreter services, where the property and services are supplied together for an all-inclusive price. In this case, there is no doubt that this is a tour package, however, for purposes of the non-resident rebate, a tour package must include short-term accommodation (Policy Statement P-089, Short-Term Accommodation) as the rebate applies only to short-term accommodation (section 252.1 of the Act). Therefore, as stated in HQR0000920, one must determine the tax status of the remaining portions of the tour package once the long term accommodation is removed.

If you have any questions, please do not hesitate to contact Cheryl Leyton at (613) 954-5124.

Ivan Bastasic
Director
Services and Intangibles Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate