27 July 1998 GST/HST Ruling HQR0001123 - Application of the GST/HST to a Contract of Purchase and Sale

Dear XXXXX

Thank you for your letter of December 9, 1997 (with attachments), concerning the application of the Goods and Services Tax (GST) to the transaction(s) described below.

Statement of Facts and Transactions

Our understanding of the facts and transactions, is as follows:

XXXXX purchased the above-noted lots from XXXXX under a contract of purchase and sale ("the Agreement") which became binding on the parties on XXXXX

•   Lots XXXXX were bare while lots XXXXX had houses which had been constructed by XXXXX and required deficiency work to be done prior to being listed for sale. Neither of these houses had been previously occupied as a place of residence and the houses are considered to single unit residential complexes as defined for GST/HST purposes.

•   The Agreement gave XXXXX possession of the lots from XXXXX and entitled XXXXX to complete and sell the homes on lots XXXXX and construct homes on and sell lots XXXXX[.]

XXXXX retained title to the lots and the agreed to transfer title of the individual lots directly to the ultimate purchasers of the homes at the direction of XXXXX to XXXXX in the event of a sale of a lot. Payment of the specified amounts was on account of the purchase price for the XXXXX lots provided for in the Agreement. Proceeds from the sale of a particular lot in excess of the amount specified to be paid to XXXXX in respect of the lot were retained by XXXXX completed construction of the houses on lots XXXXX and constructed houses on lots XXXXX. Each of the lots has been sold. The offers to purchase the completed homes were accepted by XXXXX Title to each property was transferred to the purchaser by XXXXX at the direction of XXXXX on closing of each sale.

Ruling Requested

You have asked whether XXXXX is responsible for collecting and remitting GST on the sale of the houses and if the company may credit the GST/HST New Housing Rebates to qualifying purchasers.

Ruling Given

Based on the facts set out above, we are providing the following rulings:

•   XXXXX is a "builder" as defined for GST/HST purposes of the residential complexes on the XXXXX lots.

•   XXXXX has made a taxable supply by way of sale to the purchasers of each of the residential complexes and, as a builder, is required to collect and remit GST applicable on each sale.

•   Where pursuant to subsection 254(2) of the Excise Tax Act ("the Act"), a purchaser of a residential complex is entitled to claim a rebate of a portion of GST payable on the purchase and the purchaser submits an application in prescribed form to XXXXX may, pursuant to subsection 254(4) of the Act, credit the amount of the rebate in favour of the purchaser.

These rulings are subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by these rulings provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to departmental interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9212.

Yours truly,

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