24 January 2000 General Information Letter 6986/HQR0000592 - GENERAL INFORMATION LETTER Request for GST Interpretation for Generic "Terms and Conditions["] -

Dear XXXXX

This letter is in regard to XXXXX request from XXXXX for a review of a generic "terms and conditions" document pertaining to programs delivered under the XXXXX XXXXX. It is XXXXX belief that payments made in respect to the programs delivered under the XXXXX are not consideration for a supply and would not be subject to the Goods and Services Tax/Harmonized Sales Tax (GST/HST).

Please note that as of November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency (CCRA).

Although the documents submitted provide a good summary of XXXXX programs, the information is of a general nature and it is not possible for us to provide a ruling concerning the programs in question. In the "terms and conditions", it states that each approved proposal will be the subject of a formal agreement specifying the responsibilities of each party, the items for which expenditures are anticipated, the conditions under which the payments will be made, and mutually agreed upon measures designed to assess the success of the activity in attaining its objectives. In order to provide a ruling, generally, we require a copy of the agreement between XXXXX and its coordinator as well as any other pertinent information relating to the particular program.

What must be determined with respect to the programs delivered under the XXXXX XXXXX is whether payments made by XXXXX under these programs are consideration for a taxable supply. Section 165 of the Excise Tax Act (ETA) requires every recipient of a taxable supply made in Canada to pay tax in respect of that supply equal to 7% (15% in HST provinces), where the taxable supply is not zero-rated, on the value of the consideration. Therefore, where it is determined that a payment is consideration for a taxable supply it will be subject to the GST/HST.

Generally, the payments made under XXXXX programs are considered to be grants or subsidies. The CCRA relies on Technical Information Bulletin B-067, Goods and Services Tax Treatment of Grants and Subsidies (TIB-067) in order to make determinations as to the tax status of these types of payments. TIB-067 basically provides that where a grantor organization makes a payment for a supply which is for the public good, the payment will not be viewed as consideration. However, where the payment results in a direct supply to the grantor organization or to a specified third party, other than a supply made for the purpose of accountability, the payment will be viewed as consideration and will be subject to the GST/HST.

For your information, we have enclosed summaries of several letters that the CCRA has provided to coordinators regarding the tax status of payments made by XXXXX under its various programs.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0370.

Yours truly,

Brent Fleming
Governments Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

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R11925-1