8 July 2003 GST/HST Ruling 44511 - Shellfish Aquaculture Nets

Dear XXXXX:

Thank you for your letter XXXXX (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the facts described below.

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX. (the "Company") manufactures and sells shellfish equipment to the aquaculture industry.

2. The Company offers as part of its shellfish equipment product line, pearl nets, lantern nets and spat collector bags.

Ruling Requested

You have requested a ruling concerning the application of GST/HST to the supply of:

1. Pearl nets;

2. Lantern nets; and

3. Spat collector bags

Ruling Given

Based on the facts set out above, we rule that,

1. Pearl nets;

2. Lantern nets; and

3. Spat collector bags, do not fall under the zero-rating provision in section 10 of Part IV of Schedule VI to the Excise Tax Act ("ETA"). The supply of the above products are therefore taxable at a rate of 7% GST or 15% HST as applicable pursuant to subsection 165(1) of the ETA.

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.

Explanation

Generally, every recipient of a taxable supply made in Canada shall pay to Her Majesty in right of Canada tax in respect of the supply calculated at the GST rate of 7% (or HST rate of 15%, as applicable) on the value of the consideration for the supply. Where, however, a supply is a zero-rated supply, the tax rate in respect of that supply is 0%.

Section 10 of Part IV of Schedule VI to the ETA zero-rates a supply of prescribed property relating to agriculture or fishing. The Agriculture and Fishing Property (GST/HST) Regulations ("Regulations") lists property, when supplied by way of sale, that is prescribed property for the purposes of section 10 of Part IV of Schedule VI to the ETA.

1. Pearl nets;

2. Lantern nets; and

3. Spat collector bags are not included in the Schedule to section 2 of the Agricultural and Fishing Property (GST/HST) Regulations. Therefore, none of the above-mentioned products are prescribed property for the purposes of section 10 and, as such, cannot be zero-rated.

In addition, it is our position that the above-mentioned products are not "netpens for use in aquaculture". Our research indicates that netpens are three-dimensional cage-like structures consisting of a floating collar and anchored underwater nets, the function of which is to enclose and contain fish. Your products do not fit under this description and therefore cannot be considered "netpens for use in aquaculture".

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 613-952-9585.

Yours truly,

Nicole Thomas
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate