22 July 1997 General Information Letter 11590-0611710-0111735-1 - General Information Letter

Dear XXXXX

This is in response to correspondence of April 4, 1997 from XXXXX had asked for our comments with respect to a GST Application Ruling she will be sending to XXXXX regarding the GST status of assessments in respect of XXXXX operated by the XXXXX , and other revenues of the Council.

We offer the following comments with respect to the "Rulings Given", "Explanation", and "Analysis" in XXXXX letter:

Rulings and Explanations

1. The administrative penalties imposed under subsection 82(1) of the XXXXX are not consideration for a supply and therefore are not subject to the GST.

We agree with this ruling and corresponding explanation, and feel there is no need to expand the response to the "administrative penalties" question further. However, the wording should be changed to make clear that the penalties are not imposed under subsection 82(1), but imposed pursuant to the authorization given in subsection 82(1) (i.e., subsection 82(1) does not impose certain penalties, but authorizes the executive director to impose penalties as required).

2. The assessments for the XXXXX provided for under subsection 56(5) of the XXXXX are not consideration for a supply and therefore are not subject to the GST.

We agree with the ruling. However, while we agree with the conclusion that the premiums for XXXXX XXXXX are not "insurance premiums" and therefore not "exempt", the officer may want to clarify in the explanation of the ruling that the Department's viewpoint is that there is no supply being made and therefore no GST is exigible on the premium payment (although the ruling itself reflects this). XXXXX may also want to state, in the last sentence of the first paragraph of her analysis of the XXXXX , that there is no value directly to the industry member (as there is probably some indirect or intrinsic value to the member for participating in the XXXXX

3. The premiums for the XXXXX are in respect of an insurance policy and are therefore exempt from the GST as financial services.

We agree with the ruling and explanation that the XXXXX premium payments are payments for an exempt financial service.

4. The fee collected by the XXXXX pursuant to paragraph 27(g) of the XXXXX with respect to a prospectus filed by a person in order to trade in real estate outside XXXXX is exempt from the GST pursuant to section 20 of Part VI of Schedule V.

We agree with the ruling and explanation that the payment of fees with respect to filing a prospectus for trading outside of XXXXX is an exempt fee.

5. The amounts charged for providing copies of By-Laws are subject to the GST at seven per cent pursuant to subsection 165(1).

We agree with the ruling and explanation that this is a taxable supply as there is nothing in the Act to exempt it, and, if the Council is registered it is required to charge tax at 7% (since there is also nothing in the Act to zero-rate this supply).

6. The recovery of costs with respect to investigations is not consideration for a supply and therefore is not subject to the GST.

We agree with the ruling and the position taken by the officer in the explanation; this topic was discussed with General Operations and with Special Sectors. While a case can be made that there is a supply made here (the supply would be the decision of the hearing panel; the recipient of the supply is the one who is required to pay the costs) based upon a broad interpretation of the meaning of the phrases "the provision of" and "in any manner" in the definition of "supply" in subsection 123(1) of the Act, this viewpoint is not widely held, and the argument weak at best. The better view is that put forward by the officer, i.e., there is no property or service being supplied to either the third party or the industry member and therefore no supply takes place.

7. The penalties or interest charges collected pursuant to paragraph 12(v) of the XXXXX are exempt from the GST as financial services.

We agree with this ruling. The officer may want to put an explanation in the letter that this ruling is limited only to the penalty and interest provisions in paragraph 12(v) of the XXXXX and not to the entire paragraph.

Interpretation

We agree with this interpretation and the fact that it is integral to the letter as a whole.

Analysis

In the analysis portion of her letter (under the rulings interpretation routing slip) XXXXX states "The only amounts not discussed in the ruling are the fines that may be assessed pursuant to subsection 80(1) as it appears that these amounts are fines payable to a court as opposed to payable to the XXXXX We believe these fines are paid to the XXXXX based upon a careful reading of the XXXXX Even if they are not, a ruling should be issued in the letter stating that these fines - regardless of who they are paid to - are not subject to GST.

Subsection 80(3) further says that a person who is convicted of an offense under sections 17, 18, 20, 24, or 25 shall return any commission or remuneration received (in addition to any fine or administrative penalty (under section 82) payable. If there was GST collected on the commissions or remuneration, there will be an adjustment to the GST of the industry member. We recommend that an interpretation to this effect be included in the letter.

Under section 82, the XXXXX may, instead of issuing a fine, require the person to pay to the Council an administrative penalty. Subsection 82(3) states that a person who pays an administrative penalty in respect of a contravention may not be charged under the XXXXX with an offense (i.e., under section 80) in respect of that contravention. This administrative penalty would not be subject to GST either. A ruling to this effect should be included in the letter.

Should you have any further questions or require clarification on the above or any other GST/HST matter, please do not hesitate to contact me at (613) 954-4393.

Yours sincerely,

Karl P. Marten
Financial Institutions Unit
Financial Institutions & Real Property Division
GST Rulings and Interpretations Directorate

Legal References: ss. 123(1)"consideration; ss 123(1) insurance policy; ss. 141.01(1.1)

NCS Subject Code(s) - G 111590-0611710-0111735-1