31 March 1998 GST/HST Interpretation HQR0000820 - The Meaning of "Otherwise than Exclusively in the Course of a Commercial Activity" for the Purpose of Subsection 3(2) of the Joint Venture (GST) Regulations [SOR/91-36]

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

                                                                        March 31, 1998

Dear XXXXX

Thank you for your letter of September 30, 1992, concerning the meaning of "otherwise than exclusively in the course of a commercial activity" for the purpose of subsection 3(2) of the Joint Venture (GST) Regulations. We apologize for the delay in our response.

Interpretation Requested

You note in your submission that "exclusive", in respect of the use of property by a person other than a financial institution, means "all or substantially all" of the use of the property by the person. "Substantially all" is generally construed as 90% or more. Consequently, for GST purposes, property used 90% or more in the course of a commercial activity is considered to be used exclusively in the course of a commercial activity, and property used less than 90% in the course of a commercial activity is considered to be used otherwise than exclusively in the course of a commercial activity. But to what period of time does this exclusive use test apply for the purpose of subsection 3(2) of the Joint Venture (GST) Regulations? In your view, the test should be applied over the relevant fiscal year.

Interpretation Given

For the purpose of subsection 3(2) of the Joint Venture (GST) Regulations, to determine whether property is used exclusively in the course of a commercial activity, the use of the property should be considered over a period of time which is appropriate in the circumstances. The Department will generally consider the life of the joint venture, or a one year period, to be appropriate, although a different period could be used depending on the circumstances.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST Memoranda Series, do not bind the Department with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please contact me at (613) 954-7931.

Yours truly,

John W. Smith
A/Policy Officer
Policy Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate

Legislative References:           s. 273(1)