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.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 196605
Business number: […]
Dear [Client]:
Subject: GST/HST RULING
Application of GST/HST to […][Z licences] and […][Z permits]
Thank you for your letter of January 15, 2019, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to […][Z licences] and […][Z permits] supplied by […] ([…][Organization Z]). We apologize for the delay in our response.
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 facts as follows based on your letter, telephone conversations, and [Organization Z]’s website:
1. [Organization Z] is continued as a corporation without share capital under [section] […] of […][Act Z (the industry specific legislation)] (Footnote 1) .
2. […][Per section […] of Act Z, Organization Z is mandated to regulate the practice of profession Z].
3. Relevant provisions from [Act Z] include:
[…][Sections cited from Act Z include: definitions; the section that states a licensed person is a member; the section related to the making of regulations; the section related to the passing of by-laws; the section prohibiting the practice of profession Z without a Z licence or a Z permit; sections pertaining to obtaining a Z licence or a Z permit; and the fines that are imposable if a person practices profession Z without a Z licence or a Z permit]
4. Relevant provisions of the […][Regulation] (Footnote 2), made under section […] of [Act Z], include:
[…][Sections of the Regulation that relate to the sections of Act Z discussed in Fact #3].
5. […] lists the fees for the [Z licences] and [Z permits].
6. The […][fee for a Z licence] is $[…]. […][Additional information about the fee].
7. The […] fee for a [Z permit] […] is $[…]. […][Additional information about the fee]
8. […][More information about applicable fees].
9. A […][Z licence authorizes a person to] use the title […] and to be employed as […].
10. A [Z permit authorizes] […][an entity] to provide services […].
11. [Organization Z] is not a charity as that term is defined subsection 123(1).
12. [Organization Z] has been registered for the GST/HST since [mm/dd/yy]. It uses business number […] to file its GST/HST returns and claim input tax credits.
RULING REQUESTED
You would like to know:
1. Is [Organization Z] required to charge GST/HST on the supply of a [Z licence] to an individual “with Native status” located on a reserve?
2. Is [Organization Z] required to charge GST/HST on the supply of a [Z permit] to a sole proprietorship “with Native status” located on a reserve?
3. Is [Organization Z] required to charge GST/HST on the supply of a [Z permit] to a corporation “with Native status” located on a reserve?
RULING GIVEN
Based on the facts set out above, we rule that:
1. No. The supply of a [Z licence] is exempt from the GST/HST under paragraph 20(c) of Part VI of Schedule V for all persons including Indians.
2. No. The supply of a [Z permit] for a sole proprietorship is exempt from the GST/HST under paragraph 20(c) of Part VI of Schedule V for all persons including Indians.
3. No. The supply of a [Z permit] for a corporation is exempt from the GST/HST under paragraph 20(c) of Part VI of Schedule V.
EXPLANATION
Paragraph 20(c) of Part VI of Schedule V to the ETA exempts a supply of a licence, permit, quota or similar right (other than a right or service supplied in respect of the importation of alcoholic beverages) where the supply is made by a government or municipality or by a board, commission or other body established by a government or municipality. GST/HST Policy Statement P-247, What Constitutes an “Other Body Established by a Government” for Purposes of the Excise Tax Act (the Act)?” sets out the Canada Revenue Agency’s position with respect to what type of body would be an “other body established by a government”. This policy provides that the body must fall into one of three categories. The categories are:
Category 1 – A body created by a government in legislation;
Category 2 – A body incorporated by a government; and
Category 3 – A body that meets the following criteria – (a) a government has taken action relating to the body; (b) the body is set up to undertake a public service function that government usually undertakes; and (c) the government retains the overall authority for the regulatory program, and the body remains accountable to the government.
[Organization Z] was continued under [Act Z] and is therefore considered to be an “other body established by government” under Category 1 for the purposes of section 20 of Part VI of Schedule V.
The supply of a [Z licence] or a [Z permit] by [Organization Z] is therefore an exempt supply under paragraph 20(c) of Part VI of Schedule V and is not subject to the GST/HST. [Organization Z] should also not charge GST/HST on the fees associated with the supply of the [Z licences] and [Z permits], such as […]. There are no provisions within the ETA which would enable [Organization Z] to elect to have an exempt supply of a [Z licence] or [a Z permit] treated as taxable.
[…]. The CRA is responsible for the administration of the ETA and its Regulations as enacted by Parliament. A legislative amendment to the ETA would be required to treat such supplies by a body established by government as taxable supplies. Legislative amendments are a matter of tax policy, which falls within the responsibility of the Department of Finance Canada. We have notified officials of that Department of your concerns.
Generally, a GST/HST registrant is eligible to claim input tax credits to recover the GST/HST it pays to the extent that its purchases and expenses are inputs into making taxable supplies for consideration. No input tax credit is available where a purchase or an expense was incurred for the purpose of making exempt supplies (such as the [Z licences] and [Z permits]), or for a purpose other than the making of supplies. For more information, see Guide RC4022, General Information for GST/HST Registrants.
GST/HST collected in error
Where a supplier has collected GST/HST in respect of an exempt supply, the GST/HST has been collected in error.
Under subsection 232(1), where a person such as [Organization Z] has charged or collected an amount as or on account of GST/HST in error on an exempt supply, the person has the option to adjust, refund or credit the excess tax within two years after the day the amount was so charged or collected. If the person chooses to adjust, refund, or credit the excess amount of GST/HST, a credit note containing prescribed information must be issued by the person to the recipient (the client) within a reasonable time. The person may also make an adjustment to its net tax calculation to account for any adjustment, refund or credit of an amount of tax charged or collected in error to the extent that the amount was included in determining the net tax for the reporting period or a prior reporting period.
Alternatively, persons (that is, […] clients of [Organization Z]) that paid an amount as or on account of GST/HST in error on supplies that are exempt may file an application for a rebate of amounts paid in error. However, if they have claimed an input tax credit with respect to an amount of GST/HST paid in error, they cannot also claim the same amount as a rebate. Form GST 189, General Application for Rebate of Goods and Services (GST)/Harmonized Sales Tax (HST), is used to apply for the rebate. The time limit to apply for this rebate is within two years after the day the amount was paid.
Additional information concerning tax collected in error may be found in GST/HST Memoranda 12.2, Refund, Adjustment, or Credit of the GST/HST under Section 232 of the Excise Tax Act. Further information regarding rebate claims is set out in Guide RC4033, General Application for GST/HST Rebates.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the rulings given in this letter provided that: none of the issues discussed in the rulings 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.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-7943. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Desneiges Arbour
Charities and Non-profit Organizations Unit
Public Services Bodies and Governments Division
Excise and GST/HST Rulings Directorate
FOOTNOTES
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