GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Avenue
Vanier, ON K1A 0L5
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Subject:
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GST/HST APPLICATION RULING
GST on Subdivision Application Fees
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Dear XXX
Thank you for your letter of August 29, 1997, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transactions described below.
Statement of Facts
Our understanding of the facts, the transactions, and the purpose of the transactions are as follows:
1. Approval from XXXXX is required before an individual can subdivide a parcel of land.
2. XXXXX has the authority to delegate this responsibility to designated planning district boards (District Boards). At the present time, XXXXX has only delegated this responsibility to XXXXX District Boards.
3. Processing an Application for Subdivision is done in two stages. The first step is the Application and the second step is the Lot Approval.
4. As established by XXXXX there is a set fee for each of these services. The current Application Fee is XXXXX and the Lot Approval Fee is set at XXXXX per lot approved.
5. After receiving an Application with the required fee, XXXXX or the District Board, circulates the application to other interested government bodies, checks to ensure that local zoning by-laws are complied with and will ultimately make a recommendation to council to either approve the application with or without conditions or deny the application.
6. If the Application is approved, the Lot Approval Fee is charged on each lot approved. For this fee, a certificate is issued which will allow that individual lot to be registered.
Transaction
There is a two step process involved for an individual to subdivide a parcel of land. There is the initial Application and if approved, there is the Lot Approval. There is a set fee charged by XXXXX or the District Board for each of these services.
Ruling Requested
Both the supply of processing the Application and issuing the Lot Approval are exempt supplies in accordance with paragraph 20(c) of Part VI of Schedule V to the Excise Tax Act.
Ruling Given
Based on the facts set out above, we rule that both the Application and the Lot Approvals are exempt supplies in accordance with paragraph 20(c) of Part VI of Schedule V to the ETA when these supplies are made by XXXXX
If the portion of the Application Fee that relates to the supply of the service of verifying compliance with local zoning by-laws is billed or identified separately to the recipient or is the only supply provided for that Fee, section 146 of the ETA will deem this supply to have been made in the course of a commercial activity and it will therefore be taxable.
This ruling is 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 this ruling provided that none of the above issues are 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.
Explanation
Subsection 165(1) of the Excise Tax Act (ETA) imposes the GST on all taxable supplies made in Canada. In accordance with subsection 123(1) of the ETA, a taxable supply "means a supply that is made in the course of a commercial activity". This same subsection defines commercial activity to be "a business carried on by the person, ... except to the extent to which the business involves the making of exempt supplies by the person".
Based on this, only supplies made in the course of a commercial activity will be taxable. If it is determined that the activity in question involves the making of exempt supplies, we can conclude that the supply was not made in the course of a commercial activity and therefore it would not be taxable.
In order to add greater certainty that specific supplies made by a municipality or government will be taxable, section 146 of the ETA deems certain supplies to have been made in the course of a commercial activity.
In particular, paragraph 146(a) of the ETA indicates that the supply of testing or inspecting property to verify that certain standards are met is deemed to be a supply made in the course of a commercial activity. This would include verifying whether or not local zoning by-laws have been met.
Paragraph 20(c) of Part VI of Schedule V to the ETA exempts the "supply of a license, permit, quota or similar right...and the supply of any service in respect of an application for such a right,". This paragraph will exempt the supply of issuing the certificate which gives the recipient the right to register the lot, as this is a right similar to the supply of a license or permit. This paragraph will also exempt the portion of the Application Fee that is not related to the verification that zoning by-laws have been satisfied.
When the supply of verifying that zoning by-laws are satisfied is a requirement for the other regulatory services to be completed at the Application stage and they are all provided for a single consideration, the entire supply will be exempt in accordance with paragraph 20(c). We consider supplies to be provided for a single consideration when they are identified or invoiced to the recipient as one.
If the cost of the verification is identified separately to the recipient or if it is the only supply provided for the Application Fee, then this supply will be deemed to have been made in the course of a commercial activity and it will be taxable.
If the designated planning district boards have received a municipal determination in accordance with paragraph (b) of the definition of "municipality" in subsection 123(1) of the ETA, the above ruling and comments can be applied to them. If the individual district boards require any additional information or want a ruling specific to their transactions, they must write to us directly or provide us with third party authorization.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact the undersigned at (613) 952-0329 or Donna Harding, Manager, Governments Unit at (613) 954-3551.
Yours truly,
Mike Godwin
Policy Officer
Governments Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate
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