14 June 2000 GST/HST Interpretation 27037 - Section 4 of Part V of Schedule VI

Dear XXXXX

This is in response to your letter dated February 15, 2000, in which you requested confirmation of Canada Customs and Revenue Agency's (CCRA) interpretation of section 4 of Part V of Schedule VI to the Excise Tax Act ("the Act"). I understand that the question of interpretation has arisen in the context of your review of the treatment of exports and imports generally, and of whether the provisions in this area could be improved by the Department of Finance.

Section 4 of Part V of Schedule VI to the Act zero-rates a supply of a service (other that a transportation service) in respect of tangible personal property that is ordinarily situated outside Canada, temporarily imported for the sole purpose of having the service performed, and exported as soon as is practicable after the service is performed. This section also zero-rates any tangible personal property (TPP) supplied in conjunction with the service.

Your department has requested confirmation as to whether this section would be interpreted as applying to a situation where goods are imported solely for the same supplier providing, to the same recipient, two or more services in respect of the goods, whether or not as separate supplies.

Our response hinges on the interpretation of "sole purpose" and whether the reference to "service" could be interpreted to include multiple services. For example, if TPP is temporarily imported for a single purpose, would the CCRA allow zero-rating of multiple services if the sole purpose of importing the TPP would be to perform the services.

The CCRA conducted a review of the administration of this section of the Act, and concluded that it relies on whether the importation is made for the "sole purpose" of having the service, or services, performed. Therefore, the reference to service could be interpreted to mean multiple services.

To illustrate, in a case involving harness race horses, imported for the sole purpose of boarding, training and conditioning, the Department decided that the importations were zero-rated under section 4 of Part [V] of Schedule VI to the Act because the sole purpose of the importation was for boarding, training and conditioning.

In a second case, concerning the question of horse breeding, the Department determined that the supply of breeding services would be zero-rated under section 4 of Part V of Schedule VI to the Act. However, the letter, written by the Field, did not raise the question of the GST status of the boarding service. The Headquarters' officer, who reviewed the letter, stated that it was not clear whether the boarding services were provided as a separate supply, or as part of a single supply including the breeding services. In any case, whether the boarding services were supplied separately, and were considered incidental, or as part of a single supply, section 4 of Part V of Schedule VI to the Act would apply to zero-rate the consideration relating to the boarding services.

In addition to the question of multiple services, the Department of Finance has interpreted section 4 to mean "the same supplier providing to the same recipient", although there is no such distinction in the legislation. The term, "same supplier" appears in the Explanatory Notes (1999/12/02) and Notice of Ways and Means Motion (1998/02/24) pertaining to subsections 252.1(6) and 252.1(7) of the Act where a rebate cannot be claimed from the same supplier for any given night. The term also appears in the definition of "continuous journey" in section 1 of Part VII of Schedule VI to the Act. Considering the term, "same supplier" does not appear in section 4 of Part V of Schedule VI to the Act, the possibility exists that there could be more than one supplier providing multiple supplies. Furthermore, the section does not mention the recipient, same or otherwise, indicating that the supply could be made to more than one recipient.

With respect to the administration of section 4 of Part V of Schedule VI to the Act, the CCRA confirms the fact that this section would be interpreted as applying to a situation where goods are imported solely for a supply of two or more services in respect of the goods, whether or not as separate supplies. The fact that this section makes no mention of a recipient or a supplier, but only of a supply, could be interpreted to mean that more than one supplier could be providing the services to more than one recipient, providing that each of the services contribute to the sole purpose of the importation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact Ivan Bastasic at (613) 952-8810 or Cheryl Leyton (613) 952-6743.

Yours truly,

J.A. Venne
Director, General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate