File: 11895-1
XXXXX RITS0511
XXXXX
XXXXX
XXXXX July 23, 1997
XXXXX ,
This is in response to your letter of January 14, 1997, in which you requested clarification of the administration of the recently amended section 28 of Part VI of Schedule V to the Excise Tax Act (ETA). Specifically you are concerned about the implications of the use of the terms "branch or division" in the amended legislation.
XXXXX is concerned that the above reference to "branch or division" may be interpreted by Revenue Canada such that supplies of telecommunication services, electricity, gas or steam between branches or divisions of the same municipality would be considered taxable supplies.
For ease of reference, the amended portion of section 28 after paragraph (e) follows:
"but not including
(f) a supply of electricity, gas, steam or telecommunication services made by a municipal body or a para-municipal organization, or a branch or division thereof that acts as a public utility, or
(g) any supply made or received by
(i) a provincially established designated body,
(ii) a para-municipal organization designated under section 259 of the Act or section 22 or 23, or
(iii) another organization referred to in paragraph (e),
otherwise than in the course of the designated activities of the body or organization, as the case may be. (emphasis added)"
The amendment is pursuant to the provisions of Bill C-70 and is effective for supplies for which consideration becomes due after April 23, 1996 or is paid after that date without having become due. Bill C-70 received Royal Assent March 20, 1997.
Supplies within a municipal entity of telecommunication services, electricity, gas or steam, such as supplies between branches or divisions of a municipal corporation are not considered to be supplies for Goods and Services Tax (GST) or Harmonized Sales Tax (HST) purposes. Since no supply is considered to have been made, there are no GST implications. In other words, transactions within the same legal entity are not subject to the GST.
On the other hand, where the branch or division of the municipality supplies electricity, gas, steam or telecommunications services to an organization outside of the municipal entity, such as supplies made to a para-municipal organization, the supply is subject to the GST at 7% or to the HST at 15% as the case may be.
I hope that this clarifies this issue. The Revenue Canada field offices have been advised of this position. If you would like to discuss this matter further, please do not hesitate to contact Ken Syer at (613) 952-9590 or Owen Newell at (613) 954-4280.
J. A. Venne
Director
Public Service Bodies and Governments
GST Rulings and Interpretations
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