7 December 2000 GST/HST Interpretation 7684/HQR0001290 - Construction Services and Travel Allowances

Dear XXXXX:

I am responding to a request concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to construction services obtained and mileage claims paid by XXXXX[.] I apologize for the unavoidable delay in responding to your request. This request was initially made by your representative, XXXXX[.]

Statement of Facts

Based on XXXXX written submission of XXXXX, our understanding of the facts is as follows:

1. XXXXX[.]

2. During the period XXXXX acquired property and constructed a XXXXX structure.

3. Currently, this property is not reserve land. XXXXX[].

4. The construction of the XXXXX structure totaled approximately XXXXX and approximately XXXXX in GST was paid for various construction materials and services. During this period, the GST paid was expensed and no action was taken to recover this amount.

5. XXXXX also intends to construct a XXXXX on the purchased property.

Interpretation Requested

1. What is the application of GST to construction materials and services obtained by XXXXX for the construction of a XXXXX structure on land bought with XXXXX that is not reserve land?

2. Is XXXXX eligible to claim a GST rebate on travel allowances paid to XXXXX for the acquisition of transportation services?

Interpretation Given

1. GST must be paid on the supply of construction materials and services obtained to construct a XXXXX structure on land that is not reserve land.

2. XXXXX is not eligible to claim a rebate of GST paid on travel allowances under the administrative provisions of Technical Information Bulletin B-039R ("TIB B-039R"), "GST Administrative Policy Application of GST to Indians."

Analysis

XXXXX Construction Services

When a recipient receives supplies of construction materials and services from the same vendor, it is generally treated as a single supply of construction services.

TIB B-039R provides that services acquired on or off reserve by an eligible body for band management activities or for real property on reserve are relieved of GST/HST.

However, the construction services in question are being acquired for real property off reserve. As such, the acquisition of these construction services is not eligible for tax relief as set out in TIB B-039R. XXXXX must pay the tax charged on these services.

Regardless of who is the recipient, GST is payable on this supply of construction services acquired for the XXXXX structure, as these services are acquired for real property off reserve and do not meet the requirements of TI[B ]B-039R.

However, XXXXX may be entitled to Input Tax Credits (ITCs). Under section 169 of the ETA, where property or a service is acquired for consumption, use or supply by a registrant (defined under the ETA as being a person who is registered or who is required to be registered), the registrant is entitled to claim an ITC for the tax which is paid or payable based on the acquisition to the extent to which the property or service is for consumption, use or supply in a commercial activity of the registrant.

Travel Allowances

As noted in TI[B ]B-039R, where an eligible body acquires transportation, short-term accommodation, meals and entertainment off reserve, these purchases are subject to GST at the point of sale. However, through an administrative provision, these eligible bodies may be entitled to recover 100% of the GST paid if the supplies of transportation, short-term accommodation, meals and entertainment are acquired for band management activities or for real property on reserve.

The travel allowances in question have not been acquired by an eligible body; therefore, tax relief pursuant to TIB [B]-039R would not apply. There are no administrative provisions that would allow for tax relief of travel allowances under these circumstances.

The foregoing comments represent our general views with respect to the subject matter of your letter. 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 Canada Customs and Revenue Agency 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 the undersigned at (613) 952-4157 or Tim XXXXX Krawchuk, Manager at (613) 954-7957.

Yours truly,

Lee Ann Gorman
Aboriginal Affairs Unit
Excise and GST/HST Rulings Directorate