11 September 1996 GST/HST Interpretation 11846-3 - GST RULING [Application of the GST to Canada's Contribution to Program]

Thank you for your letter of July 10, 1996, concerning the application of GST to payments made by the XXXXX to XXXXX under the above noted program.

XXXXX

Background

In the 19 XXXXX undertook a vast program of economic reform which encouraged the viability and expansion of a market economy and the private sector as well as enhancing the XXXXX economy's participation in the global marketplace. One of the problems encountered in achieving this aim was the need to assure the availability of a quality work force in sufficient quantity to ensure the competitiveness and diversification of XXXXX business. The program XXXXX, as defined by an accord between XXXXX and Canada, is intended to partially resolve this particular problem facing XXXXX authorities.

Statement of Facts

From your letter and information provided by XXXXX our understanding of the facts is as follows:

1. Canada XXXXX[.]

2. Canada and XXXXX entered into a subsidiary agreement established by virtue of the Cooperation Agreement. This agreement XXXXX Canada XXXXX[.]

3. The XXXXX states that Canada and XXXXX will collaborate in the program which will fund projects to strengthen the performance of XXXXX institutions having a training mandate (such as colleges, universities, training institutes) and the ability to play a key role in the development of the private sector.

4. In order to carry out the program, Canada and XXXXX will establish a management plan which will govern the activities, roles and responsibilities of an executing agency which will be recruited by XXXXX[.] The management plan constitutes XXXXX[.]

5. Canada's contribution which is not to exceed XXXXX will include (among other things) funding the services of an executing agency.

6. In accordance with the XXXXX and XXXXX as the executing agency, will enter into an agreement, a draft of which has been provided for our review.

7. Under the draft agreement XXXXX agrees to provide to Canada services related to the management and coordination of the program as well as services related to the activities funded by the program between the date the agreement is executed and XXXXX. "Services" and "activities funded by the program" are defined in XXXXX to the agreement and described in XXXXX to the agreement.

8. XXXXX defines "services" as all that XXXXX must do, provide or deliver to fulfil the obligations the agreement imposes upon it. "Activities funded by the program" are defined as the sponsoring of the transfer of knowledge and technologies to XXXXX institutions and organizations as approved by the XXXXX which is made up of representatives from Canada XXXXX[.]

9. The program to be carried out by XXXXX is described in great detail in XXXXX.

The program permits projects to be carried out in which XXXXX training institutions collaborate in the implementation of training centered on the specific needs of the XXXXX labour market, principally the private sector, in areas where XXXXX technology proposes an adequate response and where lasting partnerships can develop.

The program will be comprised of a range of projects. These projects are proposed by the XXXXX institutional partners, recommended by XXXXX and approved by the XXXXX[.]  Each project will indicate the inputs, outputs and define precisely the expected results which must be lasting and measurable. The project must also identify the indicators which will evaluate the project results.

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11. In carrying out the program, XXXXX must assure that all contracts signed with sub-contractors conform to the program and that XXXXX has no obligation in regard to those sub-contractors.

Ruling Requested

The government contribution made by XXXXX to XXXXX under the agreement for the activities funded by the program is not subject to GST.

Ruling Given

The payments made by XXXXX under the draft agreement fund the provision of a single service to unspecified XXXXX training institutions. As such the total amount payable by XXXXX to XXXXX under the draft agreement is not consideration for a supply and therefore is not subject to GST.

This ruling is subject to the general limitations and qualifications outlined in GST Memoranda Series Section 1.4. We are bound by this ruling provided that none of the above issues are presently under audit, objection or appeal, there are no relevant changes in the future to the Excise Tax Act, and provided that you have fully disclosed all necessary facts and transactions for which you requested a ruling.

Should you require any further information, please contact Donna Harding, A/Manager, Government Sectors at 954-3551 or Darlene Wladyka, Senior Policy Officer at 954-7947.

Yours truly,

J.A. Venne
Director
Special Sectors
GST Rulings and Interpretations