CRA rules that the transfer of land to and from a builder to secure the contract price for home construction was not subject to GST

ETA s. 134 provides that where, under an agreement in respect of a debt or obligation, a person transfers property for the purpose of securing payment of the debt or performance of the obligation, the transfer is deemed not to be a supply, and where, on payment of the debt or performance of the obligation, the property is retransferred, the retransfer is also deemed not to be a supply.

An individual transferred title to his lands (which included a detached dwelling) to a builder, who paid off the existing mortgage on the lands with new mortgage financing, demolished the existing home and built a new one, and conveyed the lands back to the individual on being paid the full contract price plus GST.

CRA ruled that, as s. 134 deemed the transfer and retransfer not to be supplies, the individual had been charged GST on the portion of the contract price that related to the lands, in error.

Neal Armstrong. Summary of 15 November 2023 GST/HST Ruling 245913 under ETA s. 134.