19 October 2000 GST/HST Interpretation 8128/HQR0001734 - Application of Goods and Services Tax (GST) - Parking Operations -

This is in reply to your memorandum dated April 7, 1999 to Daryl Hooley of this office, wherein you requested a review of the application of paragraph 1(l) of Part V.1 of Schedule V to the Excise Tax Act (ETA) with reference to supplies of parking made by a charity in the province of XXXXX.

We are pleased that we are now able to reply to your query in light of relevant proposed legislative amendments contained in the Department of Finance's October 4, 2000 Notice of Ways and Means Motion.

All legislative references are to the ETA unless otherwise noted.

We understand the facts as follows:

1. The XXXXX (the Foundation) is a registered charity within the meaning assigned to that expression by subsection 248(1) of the Income Tax Act, but is not a public institution for purposes of the ETA. Accordingly, for purposes of the GST/HST the Foundation is a charity as defined in subsection 123(1).

2. The Foundation supplies parking spaces and, until XXXXX, had charged GST on those supplies. On XXXXX, the Foundation stopped charging GST on its supplies of parking spaces because it was informed by Revenue Canada (now Canada Customs and Revenue Agency) that effective January 1, 1997 such supplies are exempt from GST when supplied by a charity. The Foundation will not pursue a GST refund for the period January 1, 1997 through XXXXX because it would be impossible for the Foundation to issue credit notes to its parking customers for those fiscal years.

Issue

Does paragraph 1(l) of Part V.1 of Schedule V exclude from exemption the supply of parking made by the Foundation from January 1, 1997 onward?

Response

Section 1 of Part V.1 of Schedule V exempts all supplies of property and services made by a charity except those supplies excluded from exemption by paragraphs (a) through (m) of that section. Existing paragraph 1(l) excludes a supply of real property from exemption under section 1 if the property was used (otherwise than in making the supply) primarily in a commercial activity of the charity immediately before the time at which tax would become payable in respect of the supply if it were a taxable supply.

The application of paragraph 1(l) to supplies by way of lease, licence or similar arrangement operates contrary to an intended policy change, announced in April 1996, to exempt all supplies of real property by a charity by way of lease, licence or similar arrangement, regardless of how that property was used by the charity immediately before the supply.

One of the proposed amendments contained in the October 4, 2000 Notice of Ways and Means Motion proposes that paragraph 1(l) be amended so that it applies only to sales of real property.

The amendment is proposed to apply to supplies for which consideration becomes due after 1996 or is paid after 1996 without having become due unless the charity has already treated the supply as taxable.

Accordingly, supplies of parking by the Foundation (other than by way of sale) will be exempt where the consideration for such supplies became due after 1996 or was paid after 1996 without having become due, except where the Foundation charged or collected any amount as or on account of tax in respect of the supply on or before Announcement Date (October 4, 2000). We understand that the Foundation in fact charged GST on its supplies of parking through XXXXX. Thus, those supplies would be taxable.

For information regarding change-in-use and basic tax content implications of the aforenoted proposed amendment, may we refer you to the draft legislative proposals and explanatory notes related to the October 4, 2000 Notice of Ways and Means Motion.

Should you have any questions or need further clarification on this matter, please do not hesitate to contact me at (613) 957-8222.

Yours truly,

(Mrs.) S.C. Cahill
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate