27 March 1998 GST/HST Ruling HQR0001017 - Application of the GST/HST to the Importation into Canada of

                                                                        GST/HST Rulings and Interpretations
Place Vanier, Tower C, 9th Floor
25 McArthur Avenue
Vanier, Ontario
K1A 0L5

Gentlemen:

I refer to your facsimile message of January 8, 1998, and our subsequent telephone conversations, concerning the application of the Goods and Services Tax (GST) to the transactions described below.

My understanding of the facts, the transactions and the purpose of the transactions is as follows. The facts in your letter of January 8, 1998, have been adjusted to reflect the additional information received since that date.

Statement of Facts and Transactions

1. XXXXX is an unregistered non-resident located in XXXXX does not carry on business in Canada.

2. XXXXX has entered into an agreement with XXXXX to provide XXXXX for XXXXX fleet. XXXXX is registered for GST/HST purposes.

3. Under the agreement between XXXXX and XXXXX agreed to deliver the XXXXX  XXXXX is registered for GST/HST purposes. XXXXX will inspect the XXXXX before accepting delivery. Title to the XXXXX passes to XXXXX upon acceptance by XXXXX of the XXXXX delivered by XXXXX has entered into a separate agreement with XXXXX whereby XXXXX will install the a XXXXX into XXXXX agreement with XXXXX contains a provision setting out XXXXX responsibility concerning acceptance of the XXXXX. Following its acceptance of an XXXXX, XXXXX will install it into one of XXXXX planes at XXXXX facility in XXXXX[.]

5. After the XXXXX is installed, the XXXXX may either be exported from Canada to XXXXX However, the XXXXX may also be used in Canada to pick up passengers who are travelling from a point in Canada and a point outside Canada.

6. In order to facilitate the importation of the XXXXX is identified as the importer on the B3 Customs Import Entry Coding Form. However, the customs broker invoices XXXXX for the GST and duties and it is XXXXX who pays these amounts directly to the customs broker.

Rulings Requested

1. XXXXX is entitled to recover the GST paid in error at the time of importation of the XXXXX. In addition, please specify under which provision XXXXX is entitled to recover the GST overpayment. Alternatively, please confirm that XXXXX may file an application for refund, as importer of record, to recover the GST paid at the time of importation by XXXXX to the customs broker on its behalf.

2. If neither of the above options apply, please confirm that XXXXX as a GST registrant and importer of record performing commercial services on goods belonging to a non-resident (i.e., XXXXX may apply for an input tax credit under subsection 169(2) of the Excise Tax Act (Act) to recover the GST paid. If XXXXX is the importer of record, that XXXXX can claim an input tax credit to recover the GST paid by XXXXX by virtue of section 180 of the Act.

Rulings Given

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

1. The GST was not paid in error at the time of importation of the XXXXX into Canada. Therefore, neither XXXXX nor XXXXX are eligible to apply for a rebate, under the provisions of section 261 of the Act, for the Division III tax paid. In addition, the provisions of subsection 216(6) of the Act would not apply because no excess amount of Division III tax was paid at the time of importation.

2. Under the provisions of subsection 169(2) of the Act, XXXXX is eligible to claim input tax credits equal to the Division III tax paid at the time of importation of the XXXXX into Canada. If XXXXX is the importer of record, the flow-through provisions of section 180 of the Act could apply and XXXXX could claim an input tax credit equal to the tax paid by XXXXX at the time of importation.

These rulings are subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST 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 Act or to departmental interpretative policy, and that you have fully described all necessary facts and transactions for which you requested a ruling

Explanation

1. An official of Revenue Canada, Customs, has confirmed that the XXXXX would not have qualified for temporary entry into Canada under item 16 of Column I of the Schedule to the Temporary Importation Regulations. That item deals with articles to be repaired, overhauled, altered or adjusted.

There are provisions whereby exporters of processing services may obtain relief from payment of the GST or the Harmonized Sales Tax (HST) imposed under Division III of the Act in respect of goods and materials imported for processing and subsequent export. However, the XXXXX (which were the property of XXXXX were imported by XXXXX for inspection purposes, and not for processing. Therefore, the XXXXX would not have qualified as non-taxable importations under the provisions of Schedule VII to the Act.

2. The service of inspecting the XXXXX is a "commercial service". Airbase's name appears on the B3 Customs import entry coding forms. Therefore, XXXXX is considered to have paid Division III tax at the time of importation. As XXXXX has acquired property of an unregistered non-resident (i.e., XXXXX for the purpose of making a taxable supply to XXXXX of a commercial service in respect of the XXXXX the provisions of subsection 169(2) of the Act apply. If the Customs entries were in XXXXX name, it is XXXXX that would have paid the Division III tax. Therefore, the flow-through provisions of section 180 of the Act could apply.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-6743.

Yours truly,

Garry L. Ryhorchuk
Senior Rulings Officer
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate

NCS Subject Code:                 11650-1