23 April 1999 GST/HST Interpretation HQR0001537 - Cultivating Equipment

Thank you for your facsimile of December 29, 1998 concerning the application of the GST/HST to agricultural equipment.

You have presented the statement of facts in a clear and logical manner. Although I have no comments on the statement of facts, I will copy them into this memorandum for the benefit of other readers.

Statement of Facts

1. XXXXX is a corporation that is registered for the GST under XXXXX[.]

2. XXXXX will be importing XXXXX agricultural use in XXXXX[.] The XXXXX is made of steel construction and is manufactured in XXXXX[.]

3. XXXXX is designed to prepare the soil for seeding in a single pass over a field and is best described as a combination cultivator/discer/rod weeder.

4. The physical layout of the XXXXX can best be described in stages:

•   The first stage consists of a unique share and tine design in two rows with points, wings and guide boards. The tine layout and stagger, and the high underbeam clearance prevent blocking in heavy trash conditions.

•   The second stage has strategically positioned, angled and concave discs in staggered formation.

•   The third stage consists of a full roller, 400 mm. in diameter with scrolled tubes.

5. The operation of the XXXXX an also best be described in stages:

•   Stage one - The winged tines ensure full width cultivation and when operated at speed provide a "lifting, fracturing and boiling" action of the soil so vigorous it produces a fine tilth and thorough mixing of surface trash and stubble.

•   Stage two - The concave discs level the soil surface and provide a further degree of cultivation and incorporation.

•   Stage three - In addition to providing accurate depth control, the rear roller consolidates and levels the soil surface.

6. The folding XXXXX versions can also be used for front mounting by removing the hollow disc roller and fitting a special front mounted linkage onto the frame of the cultivator. The pneumatic depth control wheels provide steering as well as depth control of the cultivator. The XXXXX can therefore be combined, for example, with XXXXX driven machines on the rear providing maximum versatility.

7. All the models being imported and sold in Canada have an operational width of at least XXXXX with the narrowest model being XXXXX.

8. Following is a list of the various models of the XXXXX that may be imported and sold by XXXXX in Canada.

XXXXX wants to know if the importation and supply by way of sale in Canada of the XXXXX is subject to GST/HST.

We agree with your proposed response. The importation of a XXXXX, as described in the statement of facts set out above, is a non-taxable importation pursuant to section 6 of Schedule VII to the Excise Tax Act (ETA) and as such, GST/HST is not payable in respect of the importation pursuant to section 213 to the ETA.

Additionally, in our view, the supply by way of sale in Canada of a XXXXX as described in the statement of facts above, is a zero-rated equipment.

Analysis

Subsection 165(3) to the ETA provides that the tax rate in respect of a taxable supply that is a zero-rated supply is 0%. The definition of a "zero-rated supply" in subsection 123(1) provides that the terms means a supply included in Schedule VI. Section 10 of Part IV of Schedule VI to the ETA zero-rates a supply of prescribed property. The Regulations Prescribing Property related to Agriculture and Fishing (Agriculture and Fishing Property (GST) Regulations) prescribes for purposes of section 10 of Part IV of Schedule VI that field cultivators or discers or rod weeders are properties related to agriculture XXXXX is actually a combination of zero-rated equipment. Therefore a machine that combines cultivator, discer and rod weeder functions is zero-rated if the characteristics XXXXX of each particular equipment of the complete unit are met at all times. Any additional parts sold in widths less that XXXXX would be taxable at 7/15%.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-8812.

Isabelle Breault
Goods Unit