6 September 2001 GST/HST Interpretation 36407 - GST/HST on Purchases, Expenditures and Imports

Dear XXXXX:

Thank you for your letter of June 13, 2001, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the business activity described below.

Based on the information in your correspondence of June 13, and June 27, 2001, XXXXX has been contracted by XXXXX to construct an industrial building for use by XXXXX. XXXXX is not resident in Canada and has not, at the time of your correspondence, registered for GST/HST purposes.

In the course of constructing the industrial building XXXXX will purchase goods and services and import equipment as described below:

Supplies made by Canadian suppliers to XXXXX[.] The supply and installation of a fire protection system for the industrial building (sprinkler and relevant piping).

The supply and installation of a lighting system for the industrial building.

The supply and installation of a heating/ventilation system for the industrial building.

The supply and installation of a drainage system for the industrial building.

The supply and installation of panels, insulation and cladding for self supported warehouse racking in the warehouse.

The supply of installation services of electrical and mechanical equipment that has been imported into Canada by XXXXX.

Supplies made by USA suppliers to XXXXX[.] The supply and installation of metal structures for industrial usage (i.e. racking for warehousing).

The importation of the following equipment by XXXXX:

automatic retrieval storage machines (automatic stacker cranes);

automated guided vehicles (AGV);

equipment for the AGVs (such as spare batteries and battery chargers);

PLC based control systems and electrical cabinets; and

PC based control systems.

Interpretation Requested

You seek clarification regarding the application of the GST/HST to XXXXX operations in Canada.

You seek guidance regarding whether registration for GST/HST is advantageous to XXXXX.

Interpretation Given

The GST/HST is a tax collected on supplies of goods and services made in Canada and on goods imported into Canada. With few exceptions, any taxable supply of a good or service made in Canada is subject to GST/HST.

During the construction of the industrial building, XXXXX will be the recipient of many services and goods supplied by Canadian and non-resident suppliers. In most, if not all of the cases listed, the supplier will be required to collect, and XXXXX will be required to pay GST/HST on the value of the consideration for the supply. With respect to the importation of equipment by XXXXX, GST will apply on the value of the imported equipment at the time of importation

A GST/HST registrant is a person who is registered for GST/HST purposes or is required to be registered. Generally, every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is required to be registered unless the person is a non-resident person who does not carry on any business in Canada. Considering that XXXXX has contracted to, and will construct an industrial building in Canada, XXXXX will be considered to be carrying on business in Canada and required to be registered for GST/HST purposes.

GST/HST registrants may, in determining their net tax, claim input tax credits (ITCs) in respect of the GST/HST paid or payable on imports, purchases or expenditures to the extent that they are for consumption, use or supply in the course of their commercial activities. Therefore, where XXXXX is registered for GST/HST purposes and pays GST/HST on supplies or importations, they are entitled to ITCs on the tax paid to the extent that the supply or importation is in respect of the taxable construction service they supply.

The supply of the construction service made by XXXXX is a GST/HST taxable supply made in Canada. XXXXX will be required to collect and remit tax on the consideration for the supply of the construction service.

For additional information on the GST/HST, we have attached the guide entitled Doing Business in Canada - GST/HST Information for Non-Residents.

As mentioned in our previous electronic correspondence, the following office is the designated office to register non-resident businesses situated in XXXXX:

Canada Customs and Revenue Agency
Tax Services Office
C.P. 638
1256 Barrington Road
Halifax, NS B3J 2T5
(902) 426-5300

Any enquiries regarding Provincial Sales Taxes in the province of Quebec should be directed to:

Ministère du revenu du Québec
Bureau Montreal-Centre
C.P. 3000, Succ. Pl
Desjardins, Secteur D228CA
Montreal, PQ H5B 1A4
(514) 380-8850
(800) 567-4692

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. 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 me at (613) 952-8812.

Yours truly,

Jeffrey Frobel
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate