24 February 1995 GST/HST Interpretation 11830-1[3] - Amendment to Section 174 of the Excise Tax Act (ETA) in Order that all Public Service Bodies May be Entitled to Claim a Rebate or Input Tax Credit in Respect of Meal, Travel and Other Allowances Paid to Volunteers

                                                                        File 11830-1(EB)
XXXXX                                                                                 Leg. Ref.: s. 174
XXXXX

Dear XXXXX

I am writing in response to your letter dated August 31, 1994, that was addressed to Mr. L. Jones, Director, General Tax Policy and was referred to this office for reply. You have requested that an amendment be considered to section 174 of the Excise Tax Act (ETA) in order that all public service bodies may be entitled to claim a rebate or input tax credit in respect of meal, travel and other allowances paid to volunteers.

As you are aware, section 174 of the ETA provides that input tax credits and rebates may be claimed in respect of allowances paid to employees of an employer and to members of a partnership. For example, where an organization pays an allowance to its employee and the expenses incurred by the employee include GST, then the organization is deemed to have paid tax and will be entitled to claim input tax credits in respect of purchases related to taxable supplies or rebates in respect of purchases for which an input tax credit is not available, based on the tax fraction (i.e., 7/107) of the allowance paid to the employee.

Section 174 was amended in order to provide that charities may also claim input tax credits and/or rebates for allowances paid to volunteers. The charity is deemed to have received a taxable supply of the goods or services acquired by the volunteer and will be entitled to claim an input tax credit or rebate based on the tax fraction of the allowance paid to the volunteer.

You indicate in your letter that section 174 provides an inequitable result as many public service bodies besides charities use volunteers in carrying out their activities. You mentioned as examples, hospitals, school authorities and non-profit organizations.

We would explain in this regard that hospitals, universities, public colleges and school authorities may be registered charities and thus would be entitled to claim input tax credits or rebates in respect of allowances paid to volunteers. However, under the present legislation, public service bodies (including non-profit organizations, municipalities, school authorities, etc.) that are not charities will only be able to claim input tax credits or rebates in respect of allowances paid to employees.

We appreciate receiving your comments on this matter. We would explain however that the responsibility of the Department of National Revenue is to administer the provisions of the GST according to the legislation that has been passed by Parliament. Any changes to this legislation are the responsibility of the Department of Finance. Accordingly, we are referring your letter to Finance officials.

I hope that this will be satisfactory. If you have any questions concerning the application of the GST to allowances paid by public service bodies please contact Elaine Bonnah at (613 xx 952-6761 or your local Excise/GST Office located XXXXX

Yours truly,

J.A. Venne
Director
Tax Policy - Special Sectors
GST Policy and Legislation