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Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
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Case Number: 33243
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Subject:
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GST/HST APPLICATION RULING
City of XXXXX
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Dear XXXXX:
XXXXX
Statement of Facts
Our understanding of the facts, the transactions, and the purpose of the transactions is as follows:
1) XXXXX
2) XXXXX
3) XXXXX
4) XXXXX
5) XXXXX
6) XXXXX
7) XXXXX
8) XXXXX
9) XXXXX
i) XXXXX
ii) XXXXX
10) XXXXX
i) XXXXX
ii) XXXXX
iii) XXXXX
iv) XXXXX
11) XXXXX
12) XXXXX
13) XXXXX
14) XXXXX
15) XXXXX
i) XXXXX
ii) XXXXX
ii) XXXXX
iv) XXXXX
v) XXXXX
i) XXXXX
ii) XXXXX
iii) XXXXX
iv) XXXXX
v) XXXXX
vi) XXXXX
vii) XXXXX
i) XXXXX
ii) XXXXX
iii) XXXXX
iv) XXXXX
v) XXXXX
vi) XXXXX
vii) XXXXX
viii) XXXXX
ix) XXXXX
x) XXXXX
16) XXXXX
17) XXXXX
18) XXXXX
19) XXXXX
20) XXXXX
21) XXXXX
22) XXXXX
23) XXXXX
24) XXXXX
25) XXXXX
26) XXXXX
27) XXXXX
28) XXXXX
29) XXXXX
30) XXXXX
31) XXXXX
32) XXXXX
33) XXXXX
34) XXXXX
35) XXXXX
36) XXXXX
Rulings Requested
1) XXXXX
2) XXXXX
3) That the City is entitled to claim full input tax credits on all inputs
XXXXX
4) That the supply of XXXXX is not exempt from GST under section 6 of Part VI of Schedule V, nor any other sections of the Excise Tax Act.
Rulings Given
Ruling 1
XXXXX
The activities carried on by the City XXXXX take two forms. First, the City is providing supplies of construction, XXXXX services in respect of provincial roadways. Inputs to these construction services to the Province include activities related to the planning, design and execution of the various projects carried on by the City XXXXX. Second, the City is also incurring expenses on its own behalf in acquiring and making improvements to City property.
The portion of the funding received from the Province that is used by the City in the construction, XXXXX of provincial roadways is consideration for supplies made by the City to the Province. Where the City is providing construction services on provincial roadways, it is making taxable supplies to the Province.
Pursuant to section 125 of the Constitution Act, 1867, GST is not collectible from the Province on the consideration for taxable construction services provided to it by the City. The City is entitled to claim input tax credits for the tax paid on related purchases.
Where the City is providing services of repair and maintenance on provincial roadways, it is making exempt supplies to the Province under paragraph 21.1(d) of Part VI of Schedule V to the Excise Tax Act (i.e., the "ETA"). No input tax credits may be claimed for the tax incurred on purchases used by the City in making exempt supplies.
The portion of provincial funding that is directed for use by the City in acquiring or improving City property, XXXXX is not consideration for supplies made to the Province.
The City is entitled to claim a 57.14% rebate under section 259 of the ETA for the tax paid on purchases for which no input tax credit may be claimed.
Explanation
XXXXX
It is our understanding that the Province and the City hold title to, and are responsible for, different aspects of the XXXXX. Construction of, and improvements made to this system result in benefits to both the Province and the City.
XXXXX
Based on the information provided and taking into account the scope of the activities carried on by the City XXXXX it is our view that the City is providing construction services to the Province in respect of provincial roadways.
The construction services provided by the City do not fall under the direct cost exemption in section 6 of Part VI of Schedule V to the ETA, as the City has not acquired services for the purpose of resupplying them at direct cost or less to the Province. Rather, the City has acquired various goods and services and has contributed City staff and property in the course of providing construction services to the Province. Inputs to these construction services include the activities carried on by the City's XXXXX which plans, oversees and carries out the construction projects using both XXXXX and City employees. The City also provides office space, furniture, equipment and materials as required by the XXXXX.
Therefore, funding that has been allocated by the Province for the construction services provided by the City in respect of provincial roadways is consideration for taxable supplies provided by the City to the Province. The City is entitled to claim input tax credits for the GST paid on purchases related to these supplies.
The scope of the activities carried on the City XXXXX may also include services to the Province of repairing or maintaining provincial roadways. To the extent that the City provides services of repairing or maintaining provincial roadways, streets, sidewalks, or similar or adjacent property, it is providing supplies exempted by paragraph 21.1(d) of Part VI of Schedule V to the ETA. While the City is not entitled to claim input tax credits for the tax paid on purchases incurred in the course of making exempt supplies, it may claim a 57.14% rebate to recover part of this tax.
Certain eligible projects undertaken with provincial funding clearly confer a direct benefit on the City and its residents. These include:
• XXXXX
• XXXXX
• XXXXX
• XXXXX
• XXXXX
• XXXXX
• XXXXX
• XXXXX
• XXXXX
• XXXXX
• XXXXX
• XXXXX
• XXXXX
• XXXXX
We therefore, consider that certain payments by the Province have been made in the public interest for the direct benefit of the City XXXXX and its residents.
The Province exercises significant control over the projects undertaken by the City XXXXX[.] However, the fact that the Province maintains control and oversight over the use of its funds does not mean that all the funding provided for these XXXXX projects has been made for a purchase purpose. In this situation, it is evident that a portion of the Province's funding has been provided so that the City may acquire or make improvements to its own property.
When the City acquires or makes improvements to its own property, it is not making taxable supplies to the Province in the course of a commercial activity. Accordingly, it is not entitled to claim input tax credits for the tax paid in respect of these acquisitions or improvements, but may claim the 57.14% rebate provided for municipalities under section 259 of the ETA.
Ruling 2
XXXXX
Explanation
XXXXX
Ruling 3
The City is not entitled to claim full input tax credits on all inputs XXXXX
Explanation
Input tax credits are available to the City for the GST incurred on purchases acquired, for consumption, use or supply in the course of a commercial activity, provided all the conditions in section 169 of the ETA are met. The City may claim input tax credits for purchases related to taxable supplies provided by the City to the Province, for example, construction services provided in respect of provincial roadways. The City may claim a rebate to the extent that it incurs tax on purchases that have not been made in the course of a commercial activity.
Ruling 4
XXXXX
Explanation
It is our position that the City is providing to the Province services of constructing, XXXXX provincial roadways and that it is also acquiring, constructing and improving its own property.
The direct cost exemption will not apply to the services provided by the City to the Province in the course of the projects XXXXX, as the City is not simply acquiring services for resupply by way of sale to the Province at direct cost or less. In providing construction services to the Province, the City acquires good and services XXXXX as inputs into its supply to the Province. The City also assigns its own employees to XXXXX to participate in the XXXXX overseeing the projects and it provides space and the necessary materials and equipment to assist them in carrying out their responsibilities. Accordingly, the construction services provided to the Province do not fall under the exemption in section 6 of Part VI of Schedule V to the ETA.
As mentioned earlier, to the extent that the City provides services of repairing or maintaining roads, streets, sidewalks or similar or adjacent property, these supplies will be exempted by paragraph 21.1(d) of Part VI of Schedule V to the ETA.
These rulings are 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 these rulings 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 ETA, or to our interpretative policy; and that you have fully described all necessary facts and transactions 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) 952-9590 or Tim Krawchuk at (613) 941-3268.
Yours truly,
Elaine Bonnah
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
| c.c.: |
T. Krawchuk
E. Bonnah
S. Leclaire
S. Eastman
XXXXX
Chron File
Circulation File |
| Legislative References: |
169(1), 259(3), section 6 of Part VI of Schedule V, paragraph 21.1(d) of Part VI of Schedule V |
| NCS Subject Code(s): |
R-11890-1, 11895-1 |
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