15 September 1998 GST/HST Interpretation HQR0001154 - Small Suppliers and Non-substantial Renovations

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

Dear XXXXX

Thank you for your letter of April 21, 1998 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to non-substantial renovations made by small suppliers.

Interpretation Requested

1. If a person is a small supplier as defined in subsection 148(1) of the Excise Tax Act ("the Act"), is the person responsible for remitting tax under section 192 should they satisfy the conditions of that section?

2. Is the consideration referred to in section 192 to be included in determining whether a person has exceed the small supplier threshold under subsection 148(1) of the Act?

Interpretation Given

It is our view that:

1. A small supplier who renovates or alters a residential complex of the small supplier under the conditions set out in section 192 of the Act is required, pursuant to subsection 225(1) and 228(2), to remit the tax deemed under paragraph 192(b) to have been collected by the small supplier, as calculated on the total of the amounts described in paragraph 192(a).

2. The consideration for the taxable supply deemed to have been made under section 192 of the Act should not be included in determining whether a person is a small supplier under subsection 148(1).

Analysis

Issue 1

In your letter, you indicate that it is your view that, because section 166 of the Act provides that consideration from a taxable supply of a person (other than a supply of real property by way of sale) is not included in determining tax payable where the person is a small supplier, no tax should be payable under section 192 because the deemed taxable supply is not a sale of real property. We note parenthetically that section 166 only applies where the small supplier is a non-registrant; this observation does not, however, materially affect the substance of your analysis. Paragraph 192(b) of the Act deems tax to have been collected, based on "the total determined under paragraph (a)". Therefore, in calculating the tax payable on the supply deemed to have been made under section 192, the value of the consideration for that supply is deemed to be equal to the total of the various amounts described in paragraph 192(a).

Generally speaking, section 166 of the Act reduces to nil the tax payable on taxable supplies made by non-registrant small suppliers (other than supplies of real property by way of sale). It does so by eliminating from the calculation the consideration for the supply that becomes due or is paid before it becomes due. However, in the case of section 192, while the supply is deemed to have been made for a certain consideration, that consideration is not deemed either to become due or to be paid before it comes due. The deeming provisions of subsection 152(1) are of no assistance; there is no written agreement or invoice to which to refer, and it cannot logically be said that any person "would have, but for an undue delay, issued an invoice" in respect of a deemed self-supply. Therefore, the deemed consideration in paragraph 192(a) is not to be deducted from the value of the consideration used in calculating the deemed tax in paragraph 192(b).

Accordingly, section 192 of the Act deems all persons described in that section, including non-registrant small suppliers, to have paid and collected tax based on the total amount determined in paragraph 192(a). Subsection 225(1) requires that all amounts collected as or on account of tax be included in calculating the "net tax" of a "person" (i.e., the requirement is not limited to registrants or other specific persons), while subsection 228(2) requires the person to remit the net tax. Neither subsection provides relief for small suppliers.

Issue 2

Your letter indicates that, as there is no provision in subsection 148(1) of the Act that would exclude the deemed consideration calculated in section 192, the amount determined under paragraph (a) should be included in the small supplier calculation.

Paragraph 148(1)(a) of the Act requires a person to total the value of the consideration that "became due" in the four immediately preceding calendar quarters. The difficulty is that, as noted above, while paragraph 192(a) deems a supply to have been made and received at a particular point in time, the consideration for that supply, although defined, is not deemed to have become due or to come due at any time.

Therefore, because the deemed consideration under section 192 of the Act did not become due, when making the small supplier calculation in either subsection 148(1) or 148(2), no amount in respect of the self-supply should be included.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-3413.

Yours truly,

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