18 June 2001 GST/HST Ruling 32747 - GST Relief on the Manufacture of Tubular Membranes

Dear XXXXX

Thank you for your letter of May 9, 2000 with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transaction involving the manufacture of tubular membranes and filtration equipment for the filtering industry. I apologize for the lateness of this response.

Statement of Facts

Our understanding of the facts, the transactions, and the purpose of the transactions is as follows:

XXXXX is a manufacturer of tubular membranes and filtration equipment located in the USA, and is a non-resident, non registered person for GST/HST purposes.

XXXXX imports into Canada fiberglass backing tubes, to be coated with a polymeric coating that turns the tubes into filters. The process is performed by XXXXX is registered for GST/HST purposes.

After the processingXXXXX sends the tubes from Canada to XXXXX or to one of XXXXX customers in the USA.

The tubes are always owned by XXXXX GST has been paid by XXXXX on the importation of the tubes into Canada since 1998.

Ruling Requested

You request a ruling that XXXXX is eligible for a refund of the GST paid by XXXXX on the importation into Canada of fiberglass backing tubes, for further processing in Canada and subsequent export.

Ruling Given

Based on the facts set out above, we rule that there is no provision under the Excise Tax Act (the Act) to pay to XXXXX a refund or rebate of the GST paid on the importation of goods in the present circumstances.

Explanation

I note that you stated that XXXXX will apply for GST relief under the EOPS program for future transactions. For your information, the application process and the conditions for that program are outlined in Technical Interpretation Bulletin 069 "Goods and Services Tax Treatment of Imports by Exporters of Processing Services", a copy of which is included with this letter for your convenience.

As for the eligibility of XXXXX to claim a refund of the GST that XXXXX has paid on the importations since 1998, I regret to inform you that there is no provision under the Act to pay to XXXXX a refund or rebate of the GST in these circumstances. A non-resident person who is not a registrant (registered or required to be) for GST/HST purposes is generally not entitled to recover the GST paid on importation of goods into Canada, even where such goods are being imported for further processing in Canada. There are, however, relieving provisions under the Act that may be applicable in such circumstances.

One such provision is subsection 169(2) of the Act. This subsection provides that a registrant who imports goods of an unregistered non-resident person for the purpose of performing a service (other than shipping the goods) may claim an input tax credit (ITC) for the GST paid where the service is to be provided in the course of a commercial activity of the registrant. However, it is the registrant who must import the goods of a non-resident non-registered person, and pay the tax at the time of importation, in order to be able to claim a credit in respect of the tax paid under subsection 169(2) of the Act.

The other relevant provision is Section 180 of the Act. From your letter dated May 09, 2000, I understand that you are aware of the provisions of Section 180 of the Act.

Section 180 of the Act provides for recovery of the tax paid by a non-resident non registered person on the importation of goods into Canada for further processing by a registrant. In such a case, as long as the non-resident provides the registrant with satisfactory evidence that GST/HST was paid at the time of importation, the registrant may be considered to have paid the tax and thus be able to claim an ITC to the same extent as would have been the case if the registrant had been the importer of record. The documentation you sent to us with your letter dated

May 09, 2000 would be sufficient for these purposes.

While I appreciate your concerns with respect to the application of Section 180, it is the only mechanism currently available to you for recovery of the tax paid by you on the importations at issue.

Please note that Subsection 225(4) of the Act provides for a limitation period of four years, from the end of the registrant's reporting period during which the tax was paid on importation, within which the registrant may claim an ITC in respect of the tax paid.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-4294.

Yours truly,

Francine Ménard
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate