15 October 1998 GST/HST Interpretation HQR0000735 - GST Zero-Rated Entitlements

                                                                        GST/HST Rulings and Interpretations
 Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Road
Vanier, Ontario
XXXXX                                                                                 K1A 0L5

Dear Sir/Madame:

Thank you for your facsimile of June 4, 1997, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your tour packages.

I understand from your submission that XXXXX is a non-resident, who is not registered for the GST/HST. XXXXX sending over XXXXX clients each year to ski at the major ski areas in XXXXX[.]

Interpretation Requested

The following sample itineraries all involve continuous journey. The prepaid scheduled coach services constitute a "continuous journey" and are zero-rated in accordance with the provisions of paragraph 3(a) of Part VII of Schedule VI to the Excise Tax Act ("the Act").

XXXXX

Interpretation Given

The term, "continuous journey," is defined in section 1 of Part VII of Schedule VI to the Act. The definition explains "continuous journey" in terms of the issuance of a single ticket or two or more tickets as outlined below.

Single Ticket

If more than one passenger transportation service is provided on a single ticket or voucher, the Department treats the services as part of a continuous journey and each service has the same GST status. In the case of air travel, as long as there is at least one overseas origin or destination or stopover, all passenger transportation services included in the ticket are zero-rated. Stopovers in Canada do not affect the GST status of transportation services on a single ticket. In fact, if all passenger transportation services are provided on a single ticket, a passenger may make an unlimited number of stopovers.

Two or More Tickets

If more than one passenger transportation service is provided and separate tickets or vouchers are issued for different legs of a journey, all the legs of the journey may be considered to form part of a continuous journey if certain conditions are met. Therefore, domestic passenger transportation services can be zero-rated if they are sold as part of an international continuous journey. These conditions are:

•   the transportation services provided in Canada are sold with a zero-rated international passenger transportation service;

•   the traveller receives all the tickets or vouchers from the same supplier, such as a tour operator, or from a travel agent acting on behalf of two or more suppliers;

•   all tickets or vouchers are for the same traveller;

•   there is no stopover between any of the legs of the journey for which separate tickets or vouchers are issued; and

•   the suppliers or their agents can show us that all the above conditions are met.

"Stopover," for the purposes of continuous journey, means any place where a traveller embarks or disembarks an aircraft, bus, train, boat or other mode of transportation for any reason other than to transfer to another mode of transportation, or to service or refuel the mode of transportation. Although the Act does not allow any stopovers between any of the legs of the journey, for which separate tickets are issued, an unlimited number of stopovers are permitted with each ticket. However, one stopover can be allowed on round trips to or from Canada if the itinerary can be separated into two continuous journeys: the inbound and the outbound.

In the sample itineraries provided by XXXXX the first two itineraries indicate there is a direct connection between the air transportation and the prepaid coach. If there are no stopovers between the air transportation service and the coach, then, the supply of the passenger transportation service by air, originating in XXXXX and terminating in XXXXX, may be considered to be a continuous journey, providing the tickets or vouchers for the different modes of transportation services are issued separately. If this is the case, the supply of the passenger transportation by air and coach would be zero-rated pursuant to paragraph 3(a) of Part VII of Schedule VI to the Act.

The third itinerary is somewhat different. It seems likely that 2 or more tickets are issued as shown below.

XXXXX

After the flight from XXXXX 1 or more nights accommodation is scheduled for XXXXX[.] This accommodation would constitute a stopover, as defined in section 1 of Part VII of Schedule VI to the Act. Subsequent to the stay in XXXXX the itinerary indicates a scheduled prepaid coach transfer to XXXXX[.] The itinerary then indicates that there is scheduled prepaid coach from XXXXX airport, after which there is a flight to XXXXX and travel by coach to XXXXX[.] From XXXXX, a scheduled prepaid coach takes the passengers back to XXXXX the itinerary indicates overnight accommodation until the scheduled flight to XXXXX. The overnight accommodation in XXXXX of less than 24 hours does not constitute a stopover. Therefore, other than the stopover in XXXXX there have been no additional stopovers. The one or more nights stopover in XXXXX would normally mean a break in the continuous journey because a stopover is not permitted between any of the legs of a journey, for which separate tickets are issued. However, in such cases the Department allows a single stopover on an administrative basis, permitting the itinerary to be separated into two separate continuous journeys, the inbound journey comprising the flight from XXXXX. Therefore, the stop in XXXXX for one or more nights prior to the trip to XXXXX would not constitute a break in the continuous journey because there was no break in the outbound journey from XXXXX to XXXXX[.]

Therefore, the entire trip is considered to be a continuous journey of two or more tickets with a single stopover (in XXXXX after the flight from XXXXX which the Department allows on an administrative basis. The supplies of the passenger transportation services that are part of this continuous journey are zero-rated pursuant to paragraph 3(a) of Part VI of Schedule VI to the Act.

Pursuant to subsection 165(3) of the Act, the tax on the zero-rated supply is 0% per cent.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Department with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series. Also, please find enclosed the most recent version of the guide, GST/HST Information for Non-Resident Tour Operators.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-5124.

Yours truly,

Cheryl R. Leyton
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate

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