17 August 1998 GST/HST Interpretation HQR0001276 - Lease of Capital Equipment

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

Dear XXXXX

Thank you for your letter of August 5, 1998, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to proposed transactions regarding the leasing of capital equipment to be used in gaming activities.

It is our understanding that the XXXXX is planning to establish a wholly-owned subsidiary XXXXX which will purchase slot machines, terminals, and computer equipment. XXXXX will then lease all of this equipment to XXXXX for use in its lottery and casino business. XXXXX will pay XXXXX GST on the value of the consideration charged for the lease of the equipment. Consistent with the Draft Regulations Amending The Games of Chance Regulations (Draft Regulations), released January 30, 1998, XXXXX will not claim input tax credits (ITC) for the tax paid on the consideration paid or payable for the lease to the extent the assets are used in gaming activities. Further XXXXX would self assess 7% GST on the value of the consideration paid for the leased equipment used in gaming activities.

XXXXX would like Revenue Canada's opinion regarding its proposed treatment of the lease.

It is our view that the lease of the equipment to XXXXX is a taxable supply and XXXXX will be entitled to claim ITCs for GST incurred on property or services acquired for consumption or use in making that taxable supply in accordance with section 169 of the ETA. It is also our view that consistent with the Draft Regulations, XXXXX will self assess a further 7% on the value of the consideration paid or payable for leased assets used in gaming activities.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 613 954-7656 or Donna Harding, A/Manager, Governments, at 613 954-3551.

Yours truly,

P. Bertrand
A/Director
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate