Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
GST/HST Rulings Directorate
Place de Ville, Tower A, 5th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 243860
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Waiver of GST on construction services
Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to construction services acquired for a location off reserve. We apologize for the delay in this response.
The Canada Revenue Agency (CRA) recognizes that many First Nations people in Canada prefer not to be described as Indians. However, the term Indian is used in this letter because it has a legal meaning in the Indian Act (Footnote 1).
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand the following:
1. […] (the First Nation) is a “band” as that term is defined in section 2 of the Indian Act.
2. The First Nation is situated […][Province X]. The First Nation occupies […] reserve.
3. […][Information about an addition to the reserve that does not have reserve status].
4. The First Nation is proceeding to build […] buildings on the land […][that does not have reserve status]. The projected cost of the construction project is approximately […].
5. The First Nation is not registered for GST/HST purposes.
RULING REQUESTED
You are requesting a waiver of the GST for construction activities on non-reserve land that is to be transferred to a reserve in the near future.
RULING GIVEN
There is no legislative provision in the ETA that would allow a waiver of the GST payable on the supply of construction services on land that is not yet a reserve.
EXPLANATION
Under section 165 of the ETA, every recipient of a taxable supply (other than a zero-rated supply), made in Canada, is required to pay the tax calculated on the value of the consideration for the supply. The ETA does not contain any provision to grant a waiver to not pay GST/HST where the tax is payable.
Section 87 of the Indian Act exempts, in part, the interest of a band in reserve lands and personal property of a band situated on a reserve. That is, the interest and property must be situated on a reserve in order for tax relief to apply. Technical Information Bulletin B-039, GST/HST Administrative Policy – Application of the GST/HST to Indians (B-039), summarizes the CRA’s policy concerning the treatment of supplies made to Indians, Indian bands and band-empowered entities under the GST/HST.
Bands are eligible for relief of the GST/HST on services that have been acquired on or off a reserve when those services are acquired for band management activities or for real property on a reserve. A band must provide a certificate to the service provider attesting to the fact that the services are being acquired by the band for band management activities or for real property on a reserve. However, there is no tax relief available to a band on taxable services acquired for real property off a reserve. An example of a taxable service that is for real property off a reserve that would not be relieved of the GST/HST is construction services provided (e.g., construction of buildings) on land that is not a reserve.
On the date that the land becomes a reserve, a band would be entitled to relief of the GST/HST on property that is acquired on or delivered to a reserve, and on services acquired on or off a reserve for band management activities or for real property on a reserve, where the remaining conditions of B-039 are met.
If, under the terms of a construction contract for services, a band is required to pay an amount to a contractor covering a progress-billing period during which some of the work was completed prior to the land being designated a reserve and the remainder of the work was completed on or after the date the land was designated a reserve, relief of the GST/HST will only apply to the portion of work completed from the date the land was designated a reserve where all the conditions of B-039 have been met. Refer to B-039 for more information.
DISCLAIMER
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the CRA is bound by the ruling given in this letter provided that: none of the issues discussed in the ruling are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed. The interpretation given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-573-0977. Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Sincerely,
Desneiges Arbour
Industry Sector Specialist
Government Sectors and Indigenous Affairs Unit
Public Service Bodies and Governments Division
GST/HST Rulings Directorate
FOOTNOTES
1 R.S.C., 1985, c. I-5, as amended.
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