8 April 1999 GST/HST Interpretation HQR0001359 - The GST Implications if it Were a Municipality for ITA Purposes

This is in response to your June 10, 1998, correspondence to XXXXX  concerning the XXXXX[.] We apologize for the delay in responding.

XXXXX in her response to you, referred paragraph 7 of that letter to us for direct response as it pertains to the Goods and Services Tax. That paragraph asked, "What are the GST implications to the XXXXX[.] A determination as a municipality under the Income Tax Act pursuant to paragraph 149(1)(c) and 149(1)(d) has no bearing on the GST/HST treatment under the Excise Tax Act.

For GST/HST purposes, municipality status is conferred upon certain organizations under the Excise Tax Act (Act) in one of two ways:

Determinations under Section 123 of the Act

Pursuant to the definition of "municipality" in section 123, the Minister of National Revenue may determine certain local authorities to be municipalities for purposes of the entire Act. Where this status is conferred, the organization in question is entitled to avail itself of all the provisions in the Act which apply to municipalities, public sector bodies or public service bodies. The effect, therefore, is that a number of supplies made by the organization will be exempt by virtue of one or more of the provisions in Schedule V and the organization will be entitled to claim a rebate of 57.14 per cent of the GST paid on purchases which are not eligible for an input tax credit. Organizations who apply for a determination pursuant to section 123 must meet the criteria outlined in Technical Information Bulletin #B-046 in order to qualify.

Designations for Purposes of Exemption and Rebate

In addition to the all-encompassing determinations under section 123, the Minister of National Revenue is also empowered to designate, rather than to determine, certain other organizations to be municipalities for purposes of certain specified supplies.

For example, pursuant to section 22 of Part VI of Schedule V to the Act, the Minister may designate an organization to be a municipality; this will have the effect of exempting its supplies of installing, repairing or maintaining or interrupting services in respect of a public water distribution, sewerage or drainage system. Persons applying for such designations do not have to meet the criteria outlined in Bulletin B-046; the criteria apply only to those persons applying for a determination pursuant to section 123.

The Minister is also empowered, pursuant to section 259 of the Act, to designate certain organizations to be "municipalities" for purposes of claiming a rebate. An organization which is so designated would be able to claim the municipal rebate for GST paid on purchases which are used in carrying on the municipal services specifically listed in the designation. Therefore, where an organization is designated to be a municipality pursuant to section 22 of Part VI, for example, it will also be required to apply for a designation pursuant to section 259 in order to claim back the rebate.

In order to be determined, by the Minister of National Revenue, a municipality for purposes of the Excise Tax Act ("Act") the XXXXX must submit an application with evidence which would demonstrate that XXXXX is providing a XXXXX  This could include documents such as the XXXXX  a service contract or community operating assistance funding framework - memorandum of understanding signed by the XXXXX XXXXX[.] Should you have any questions concerning the above, please do not hesitate to contact Owen Newell, Manager, Municipalities and Health Care Services, at (613) 954-3268 or myself at 957-1175.

Don Gagnon
Technical Analyst
Educational Services and Indians Unit
Public Services Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate