31 July 2006 GST/HST Interpretation 80513 - Amending a Ticket for Passenger Transportation Service

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of a service of amending a ticket for a supply of a passenger transportation service. We apologize for the delay in responding to you.

All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.

Effective July 1, 2006, the rate of the GST has been reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST/HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to Reduction in the Rate of the GST/HST - Questions and Answers http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html on the Canada Revenue Agency's Web site.

Based on your XXXXX and our telephone conversation XXXXX, our understanding of the situation is as follows:

1. XXXXX.

2. The XXXXX acts as agent of the carriers in issuing tickets for passenger transportation services to travel agents and individuals.

3. In its capacity as agent of the carriers, the XXXXX often issues tickets for passenger transportation services between the United States and Canada.

4. In one instance, the XXXXX issued a single ticket for a passenger transportation service on behalf of a carrier to an individual. The ticket was for a continuous journey that originated and terminated in the United States with a stopover in Canada.

5. While in Canada, the individual changed his/her itinerary with respect to the time and day of departure for the return flight to the United States.

6. The XXXXX reissued the existing ticket and charged a change fee on behalf of the carrier for the service of reissuing the ticket. The XXXXX charged GST on the change fee.

Interpretation Requested

You would like to know if:

1. the XXXXX was required to charge GST on the change fee for the service of reissuing the existing ticket in respect of the return flight to the United States;

2. the XXXXX would have been required to charge GST for the service of reissuing the existing ticket in respect of the return flight had the routing of the continuous journey been reversed (i.e., if the continuous journey had originated and terminated in Canada and the individual had changed his/her itinerary while in the United States); and

3. the supply of the underlying passenger transportation service is subject to GST where, as in the scenario described in the preceding bullet, the continuous journey had originated and terminated in Canada and the individual had changed his/her itinerary while in the United States.

Interpretation Given

Interpretation 1: Reissuing an existing ticket while individual in Canada

Generally, section 165 imposes the GST/HST on taxable supplies made in Canada. With respect to a supply of a passenger transportation service, paragraph 142(1)(g) deems the supply of that service to be made in Canada where the service is, or is to be, performed in whole or in part in Canada. That being said, subsection 143(1) overrides paragraph 142(1)(g) and deems a supply, such as a supply of a passenger transportation service, to be made outside Canada where the supply is made by a non-resident person. However, one of the exceptions to the override rule in subsection 143(1), meaning that the supply is not deemed to be made outside Canada, is where the non-resident person is registered for GST/HST purposes at the time the supply is made. We have assumed that the carrier at issue, whether a resident or non-resident person, is registered for GST/HST purposes at the time the supply is made, and therefore, the supply of the transportation service is deemed to be made in Canada.

Those taxable supplies made in Canada and included in Schedule VI are subject to GST at the rate of 0%. These are referred to as zero-rated supplies.

Section 5 of Part VII of Schedule VI, in part, zero-rates a supply by a person of a service of issuing, delivering, amending, replacing or cancelling a ticket, voucher or reservation for a supply of a passenger transportation service that is part of a continuous journey that includes transportation by air, where two conditions are met:

•   the supply of the service of issuing, delivering, amending, replacing or cancelling a ticket, voucher or reservations must be made by the same person that supplies the passenger transportation service; and

•   the supply of the passenger transportation service, if it were completed in accordance with the agreement for that supply, must be included in section 3 of Part VII of Schedule VI.

Section 3 of Part VII of Schedule VI zero-rates a supply of a passenger transportation service made in Canada that is provided to an individual or group of individuals and that is part of a continuous journey of the individual or group that includes transportation by air, where

(a) the origin or termination of the continuous journey, or any stopover in respect thereof, is outside the taxation area;

(b) the origin and termination of the continuous journey, and all stopovers in respect thereof, are outside Canada;

(c) the origin of the continuous journey is within the taxation area, but outside Canada; or

(d) all places at which the individual or group embarks or disembarks an aircraft are outside Canada and the origin or termination of the continuous journey, or any stopover in respect thereof, is outside Canada.

Please note, the terms "continuous journey," "origin," "stopover," "taxation area," and "termination" are defined in subsection 1(1) of Part VII of Schedule VI. We have reproduced the relevant portions of these definitions in the appendix to this letter.

The service of reissuing an existing ticket is supplied by the XXXXX in its capacity as agent of the carrier that supplies the passenger transportation service. Where a supply of a service is made by an agent on behalf of a principal (i.e., the carrier), the supply is considered to be made by the principal for GST/HST purposes. Consequently, both the service of reissuing the existing ticket and the passenger transportation services are considered to be supplied by the carrier.

Furthermore, under this scenario the origin of the continuous journey is in the United States. Since the United States is within the taxation area, but outside Canada, the supply of the transportation service, if it were completed in accordance with the agreement for that supply, would be included in paragraph 3(c) of Part VII of Schedule VI.

As a result, the supply of the service of reissuing the existing ticket is zero-rated pursuant to section 5 of Part VII of Schedule VI. Therefore, the carrier does not collect any GST on the change fee.

Interpretation 2: Reissuing an existing ticket while the individual is in the United States

As explained in Interpretation 1, section 165 imposes the GST/HST on taxable supplies made in Canada. With respect to a supply of a service of issuing, delivering, amending, replacing or cancelling a ticket, voucher or reservation for a supply of a passenger transportation service, paragraph 142(2)(g) deems the supply of that service to be made outside Canada where the service is, or is to be, performed wholly outside Canada.

Under this scenario the service of reissuing the existing ticket is performed wholly outside Canada (i.e., the service is performed in the United States). As a result, even if the carrier is registered for GST/HST purposes, it is not required to collect any GST on the change fee.

Interpretation 3: Tax status of airfare

This scenario involves a continuous journey, for which a single ticket is issued, that originates and terminates in Canada, with a stopover in the United States. The supply of this particular passenger transportation service does not meet any of the conditions set out in section 3 of Part VII of Schedule VI. As a result, the supply is not zero-rated, but rather is subject to GST at the rate of 6%. The fact that the individual, while in the United States, amends the time and day of departure for the return flight to Canada does not affect the tax status of the supply.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Goods and Services Tax Rulings, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Goods and Services Tax Rulings.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 957-8224.

Yours truly,

Christopher Lewis
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

Appendix

Terms Defined in Subsection 1(1) of Part VII of Schedule VI

"continuous journey" of an individual or a group of individuals means the set of all passenger transportation services provided to the individual or group

(a) and for which a single ticket or voucher in respect of all the services is issued, or

"origin" means

(b) in respect of a continuous journey, the place where the passenger transportation service that is included in the continuous journey and that is first provided begins;

"stopover", in respect of a continuous journey of an individual or a group of individuals, means any place at which the individual or group embarks or disembarks a conveyance used in the provision of a passenger transportation service included in the continuous journey, for any reason other than transferring to another conveyance or to allow for servicing or refuelling of the conveyance;

"taxation area" means Canada, the United States (except Hawaii) and the islands of St. Pierre and Miquelon;

"termination" of a continuous journey means the place where the passenger transportation service that is included in the continuous journey and that is last provided ends.

2006/06/23 — RITS 80518 — GST/HST Rate Reduction