10 August 1999 GST/HST Interpretation HQR0001730 - Rebate Entitlement on Tax Paid in Error

Dear XXXXX

Thank you for your facsimile of March 30, 1999, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your operations.

XXXXX is invoiced for and receives the following goods and services while in Canada: XXXXX. XXXXX has on occasion been charged and has paid GST/HST to it's suppliers on the services noted above.

Interpretation Requested

Are the supplies noted above zero-rated (taxable at 0%) for GST/HST purposes? If so, and GST/HST was collected by their supplier in error, how may XXXXX reclaim the tax paid?

Interpretation Given

Under paragraph 2(a) of Part V of Schedule VI to the Excise Tax Act (the "Act"), a supply of property or a service (other than real property by way of sale) made to an unregistered non-resident person may be zero-rated where the non-resident person carries on the business of XXXXX[.] In addition to the other requirements of the zero-rating provision, in order for a supply to be zero-rated pursuant to paragraph 2(a) of Part V of Schedule VI to the Act, the property or service must be acquired by the person for consumption, use or supply in the course of XXXXX[.] The words "in the course of" in the context of the provision are interpreted as imposing the following two requirements:

1. the person must be XXXXX, whether the conveyance XXXXX the time the person consumes, uses or supplies the service acquired by the person; and

2. the consumption, use or supply of the service by the person must be connected with or arise from the provision of the service of XXXXX[.] Provided the conditions of section 2 of Part V of Schedule VI to the Act are met, the supplies would be zero-rated. Subsection 165(3) of the Act imposes GST/HST at a rate of 0% on taxable supplies that are zero-rated pursuant to the provisions of Schedule VI to the Act.

If XXXXX was charged GST/HST on a supply that should have been zero-rated and has not received a refund or credit of the tax paid in error from it's supplier, it may apply for a rebate under section 261 of the Act. To apply for the rebate XXXXX must complete and submit the attached GST189 General Application for Rebate of Goods and Services Tax (GST)/Harmonized Sales Tax (HST) application form. The time limit to apply for this rebate is two years after the day the tax was paid by the person.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the 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/HST 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 do not hesitate to contact me at (613) 952-8532.

Yours truly,

Jeff Frobel
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate