13 March 2006 GST/HST Interpretation 78535 - Tax paid in error

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 fax XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the sale of gold.

Based on our telephone conversations XXXXX, I understand that XXXXX a GST/HST registrant, is a jewellery manufacturer that is looking at XXXXX to buy scrap gold. XXXXX will purchase scrap gold and pay GST on that supply. XXXXX will then provide the scrap gold to a refiner XXXXX and the refiner will charge XXXXX a fee plus the GST, for the service of refining the gold. The refiner will refine the gold to a purity level of at least 99.5%, shape the gold into bars, stamp the gold bars with the purity level and identification mark of the refinery, and release the bars into the Canadian financial markets on behalf of XXXXX. The refiner will pay XXXXX the sale price of the gold bars less the refiner's service fee and the related GST.

Interpretation Requested

You would like to know the tax status of the supply by XXXXX of gold bars and XXXXX eligibility for input tax credits related to the GST paid on the scrap gold and the service related to refining the gold.

Interpretation Given

In the situation described above, the supply by XXXXX of the newly refined gold bars will be a zero-rated supply. All subsequent supplies of the described gold bars would generally be exempt. XXXXX will be eligible to claim input tax credits related to the GST paid on the scrap gold and the service of refining provided the general documentary requirements for input tax credits are met.

Explanation

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

The definition of a zero-rated supply is a supply that is included in Schedule VI. Section 3 of Part IX of Schedule VI zero-rates a supply of a financial service that is the supply of precious metals where the supply is made by the refiner or by the person on whose behalf the precious metals were refined.

A precious metal is defined in subsection 123(1), as a bar, ingot, coin or wafer that is composed of gold, silver or platinum and that is refined to a purity level of at least 99.5% in the case of gold and platinum, and 99.9% in the case of silver. In addition, to meet the definition of "precious metal" in subsection 123(1), a bar, ingot or wafer at the required levels must be generally recognized and accepted for trading on Canadian financial markets. Typically, these products will bear markings that indicate the purity level of the metal and have an identification mark of the issuing financial institution or refinery.

Where a person makes taxable supplies (whether at 15%, 7% or 0%), the supplier is eligible to claim input tax credits (where the supplier is a GST/HST registrant) for GST/HST paid or payable on inputs acquired for consumption, use or supply in the business of making such taxable supplies provided the documentary requirements of section 169 are met. This documentation includes, for example, the name and registration number of the supplier, the date of the invoice, total amount payable for the supply, the amount of GST/HST, the name of the purchaser and a description of the supply.

Paragraphs 27 to 36 of the enclosed GST/HST Memoranda 17.1 Definition of "Financial Instrument" provide additional information on precious metals.

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.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9210. 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.

Yours truly,

Dawn Weisberg
Financial Institutions Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2006/03/27 — RITS 78821 — Services by Registered Massage Therapists