5 March 2001 GST/HST Interpretation 30370 - Sale of [Bills of Exchange]

Dear XXXXX:

Thank you for your letters (by facsimile) of January 4, May 4 and May 11, 2000 XXXXX (with attachments) concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your proposed operations.

Background

XXXXX

Interpretation Requested

The XXXXX as described above, XXXXX, are financial instruments and the charge made for processing them is in respect of a financial service and therefore is not subject to the GST.

Interpretation Given

Property and services supplied in Canada by a GST/HST registrant are subject to GST/HST at a rate of 7 or 15 per cent, as applicable, unless they are specifically exempted from tax under Schedule V or zero-rated under Schedule VI to the Excise Tax Act (ETA).

Exempt supplies are supplies which are listed in Schedule V to the ETA and generally are supplies upon which no GST/HST is payable by the recipient of the supply. Part VII of Schedule V is the exempting provision for certain supplies of financial services made in Canada.

In accordance with paragraph 123(1)(a) of the ETA, a financial service includes "the exchange, payment, issue, receipt or transfer of money, whether effected by the exchange of currency, by crediting or debiting accounts or otherwise".

Subsection 123(1) of the ETA defines "money" to include

any currency, cheque, promissory note, letter of credit, draft, traveller's cheque, bill of exchange, postal note, money order, postal remittance and other similar instrument, whether Canadian or foreign, but does not include currency the fair market value of which exceeds its stated value as legal tender in the country of issuance or currency that is supplied or held for its numismatic value.

The characteristics of a cheque may be determined by reference to the Bills of Exchange Act. Under subsection 165(1) of that Act a cheque is a bill of exchange but one which is drawn on a bank and is payable on demand. A bill of exchange (which usually is not drawn on a bank) is defined as an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay, on demand or at a fixed or determinable future time, a sum certain in money to or to the order of a specified person or to the bearer.

Per the criteria stated above and from the information provided, the XXXXX can be characterized and treated as cheques, XXXXX[.] Where a XXXXX similar instrument falls within the definition a cheque (or another instrument included under the definition of money in the ETA) which is issued to transfer funds upon the credit of the issuer, then the supply of the XXXXX may be considered a transfer of money and as such will qualify as a supply of an exempt financial service pursuant to the definition in subsection 123(1) and in accordance with Part VII of Schedule V to the ETA. Accordingly, no GST/HST will be applicable to the service fee charged for issuing these cheques.

On April 1, 1997, the Harmonized Sales Tax (HST) replaced the Goods and Services Tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15 %. If you make supplies in a participating province, to the extent that they are taxable supplies (which are not zero-rated), tax must be collected at the harmonized rate.

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 Memoranda Series, do not bind the CCRA with respect to a particular situation.

Should you have any further questions or require clarification on the above, please do not hesitate to contact me at (613) 952-8811.

Yours truly,

John Nowak
Financial Institutions Unit
Financial Institutions and Real Property Division