24 June 2003 General Information Letter 44807 - GENERAL INFORMATION LETTER Credit Counselling Agencies - GST/HST Status

Dear XXXXX:

We are writing to provide your members with our views on the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to credit counselling and related services.

We understand that members of the XXXXX (Association) perform various services relating to debt reduction and money management. The services provided include negotiating reduced payments on behalf of clients, administering debt reduction plans and other debt counselling services.

In general, the information and contracts reviewed by us indicate that the services provided by organisations providing credit counselling are interdependent on each other and inter-relate with each other to form a single composite supply of credit counselling and related services. Activities such as client consultation, the preparation of a debt reduction plan, and the acceptance of payments on behalf of clients inter-relate with each other to form a composite supply of credit counselling and debt management. We would recommend using the framework set out in our GST/HST Policy Statement P-077R Single and Multiple Supplies (copy enclosed) to analyse the facts of a particular transaction to determine if the services constitute a single composite supply.

In general, credit counselling and other debt reduction services do not qualify as financial services as these services are not listed in any of the paragraphs from (a) to (m) of the definition of "financial service" in subsection 123(1) of the Excise Tax Act (ETA). The exempting provision in section 1 of Part VII of Schedule V to ETA does not apply to these services. In general, the GST/HST will apply to credit counselling and other debt reduction services.

Our comments are based on our general understanding of the services provided by organisations providing credit counselling services and related services. We trust that these comments will help to maintain uniformity within the credit counselling industry. As these comments do not relate to a particular fact situation they do not constitute an interpretation. If a particular organisation would like to have their particular situation reviewed by us, please do not hesitate to write to us and we will review their particular situation and provide them with either an interpretation or a ruling on the characterization of the services provided for GST/HST purposes.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8222.

Yours truly,

Manjula Vethanayagam
Financial Institutions Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate