3 September 1998 GST/HST Interpretation HQR0001287 - Yukon First Nations - Information Sessions March 24th & 25th

Yukon First Nations - Information Sessions March 24th & 25th

Q1. Will other First Nation individuals working on reserves or land set aside in XXXXX Yukon be entitled to the section 87 (Indian Act) exemption?

A1. Effective February 15, 1998, all taxable goods and services purchased anywhere in the Yukon, including reserves or land set aside, are subject to GST. This applies to all purchasers, including both Yukon and non-Yukon Indians and Indian bands.

Q2. Will Yukon First Nations living on reserves outside the Yukon be entitled to section 87 (Indian Act) exemption for the application of GST/HST? How does GST apply if goods are purchased by a Yukon First Nation and delivered to a reserve in northern BC?

A2. The XXXXX Final Agreement XXXXX includes a provision that identifies that "the personal property situated on a reserve outside the Yukon of a Yukon First Nation or a Yukon Indian Person resident in the Yukon" is not entitled to the tax exemption provided by section 87 of the Indian Act.

If the Yukon First Nation or the Yukon Indian person is resident in the Yukon, then goods purchased outside the Yukon are subject to GST (or HST) even if the goods are delivered to a reserve outside the Yukon.

Q3. For Indian owned businesses starting after February 15, 1998, how are input tax credits (ITC) determined considering GST was never paid prior to this date? Will these businesses be allowed to claim ITCs based on the fair market value when starting the business if no GST paid on the goods the fair market value is based?

A3. When a business registers for GST it may be eligible to claim an input tax credit equal to the basic tax content of the property it has on hand that is for use in its commercial activities at the time it registers for GST/HST.

Basic tax content is calculated as the amount of GST/HST payable on the property and improvements to the property less any amounts which were exempt of the payment of tax by another act of Parliament or which were eligible for a refund, rebate or remission (not including input tax credits). This result may then be reduced to reflect depreciation of the property since the time GST/HST was last payable.

Therefore, where GST was not paid on the purchase of the property because the purchaser was relieved from paying tax because of section 87 of the Indian Act, the basic tax content is zero and an input tax credit is not available. Also, where the purchaser claimed a rebate of tax (for example, tax paid in error) for the GST/HST paid on the property, the basic tax content is zero and an input tax credit is not available.

Q4. For sales outside the Yukon, Revenue Canada requires that the vendor or the vendor's agent must deliver the goods to the reserve in order for the Indian purchaser to be relived from paying GST/HST. Why can't the First Nation purchaser deliver his own goods to the reserve[?]

A4. Section 87 of the Indian Act provides, in part, that the personal property of an Indian or Indian band situated on a reserve is relieved of tax. In relation to GST/HST, Revenue Canada has adopted a number of guidelines designed to provide relief from taxation as guaranteed under the Indian Act. The federal government is of the view that this approach is consistent with the exemption provided by section 87 of the Indian Act and with Indian rights as recognized by law.

It must be noted that the relief from taxation applies to personal property situated on reserve. Therefore, goods sold on reserve are relieved of GST/HST. Goods sold off reserve are relieved of GST/HST if the goods are delivered to the reserve by the vendor or the vendor's agent.