1 April 1998 GST/HST Interpretation 11755-23 - Section 154 of the Excise Tax Act

This is in response of your letter dated January 8, 1993 wherein you request a ruling with respect to the application of GST to inbond sales of your products.

We understand the facts to be as follows.

The supplier is a distiller who is a Canadian resident registered for GST purposes and licensed under the authority of the Excise Act.

The recipient will include a distiller licensed under the authority of the Excise Act, a provincial Liquor Board or Commission, or any other person authorized under the Excise Act to receive spirits without payment of excise duty.

The supply in question concerns spirits provided by the supplier to the recipient on which excise duties are imposed under the Excise Act in circumstances where such duties are not payable.

Place of supply: The spirits are imported into Canada and delivered to a bonded warehouse of the recipient located in Canada or made available in Canada at the supplier's bonding warehouse.

Based on these facts you ask whether excise duties should be included in the value of the consideration for the supply of spirits made in Canada by a registrant and supplied in-bond under the Authority of the Excise Act.

Department's Position

Section 154 of the Excise Tax Act states that, "... the consideration for a supply includes any tax, duty or fee (other than the tax payable under this Part by the recipient in respect of the supply or a prescribed tax, duty or fee) imposed under an Act of Parliament or the legislature of a province on the recipient or the supplier of the supply in respect of the supply, production, imposition, consumption or use of the property or service supplied that is payable by the recipient or the supplier."

Canada

Section 52 of the Excise Act provides that goods subject to duty may be deposited in an excise bonding warehouse without payment of duty.

Subsection 58(1) of the Excise Act provides that goods warehoused under this Act, may without payment of duty, be transferred or removed from one warehouse to another in-bond, exported in-bond or released from bond to accredited representatives in Canada or any other country.

Subsection 58(2) of the Excise Act provides that goods subject to excise may be removed without payment of duty from an excise bonding warehouse to certain customs bonded warehouses.

Therefore, under the Excise Act, when the spirits are sold and transferred to a bonding warehouse in the circumstances described in your letter, duty will be imposed but is not payable in respect of that supply. Consequently, GST will be calculated on the value of the consideration, excluding excise duty which in these circumstances, is not payable.

At the time that the spirits are removed from the in-bond warehouse and sold for consumption, duty will be payable by the vendor or recipient. Therefore, as Excise duty is imposed and payable, in accordance with section 154 of the Excise Tax Act, GST will be calculated on the value of the consideration including such excise duty.

With respect to your request that we provide a GST ruling, additional information would be required; i.e. a complete description of facts and of the transaction, name of supplier and recipient, registration numbers, etc.

This information is based upon our current understanding of the Excise Tax Act and regulations thereunder in their present form and do not take into account the effects of any proposed or future amendments thereto or future changes in interpretation.

Further, while we trust that our comments are of assistance to you. we would advise that they do not constitute a GST ruling and are, therefore, not binding upon the Department in respect of any particular fact situation.

If you have any questions or require additional assistance please contact Mitch Bloom at (613) 952-8816 or Gabrielle Nadeau at (613) 954-7931.

Sincerely,

H. L. Jones
Director
General Tax Policy
Policy and Legislation
Excise/GST

GTP: 3294(GEN)