1 May 1998 GST/HST Interpretation HQR0001030 - Coming into Force Subsection 191.1(2)

Dear XXXXX

Thank you for your letter of January 14, 1998 concerning the coming into force of subsection 191.1(2) of the Excise Tax Act (ETA).

Interpretation Requested

Subsection 191.1(2) of the ETA provides that when the builder of certain types of residential complexes is deemed to have made and received a supply of the complex pursuant to subsections 191(1) to (4), the amount of GST/HST payable must be the greater of the tax calculated on the fair market value of the property, and the total of all the GST/HST payable by the builder for the real property and improvements to that property.

The coming into force provision of section 191.1 provides that section 191.1 applies after April 23, 1996 but does not apply where:

(a) the builder of the complex or addition, as the case may be,

(i) received from a grantor on or before that day, or

(ii) because of a letter of intent, memorandum of understanding or other document received from a grantor on or before that day, has a reasonable expectation of receiving from the grantor government funding in respect of the complex; and

(b) the construction or substantial renovation of the complex or addition, as the case may be, began on or before that day and is substantially completed on or before April 23, 1998.

You have asked us to provide an interpretation of the requirement that construction must have begun on or before April 23, 1996. In particular, you asked whether construction would be considered to have begun when preliminary construction procedures have been carried out.

Interpretation Given

Based on the facts provided in your submission, we conclude that for the purpose of the coming into force provisions of section 191.1, construction will be considered to have begun when preliminary construction procedures have been carried out. Examples of what constitutes preliminary construction procedures include the preparation of architectural plans and the obtaining or the requesting of building permits.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Department with respect to a particular situation.

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

Yours truly,

Michael Ezri
Rulings Officer
Real Property Unit
Financial Institutions & Real Property Division
GST/HST Rulings and Interpretations Directorate