23 February 1999 GST/HST Interpretation HQR0001575 - Application of GST to Purchases and Leases of Tangible Personal Property by Indians, Indian Bands and Band Empowered Entities in the

Dear XXXXX

Thank you for your facsimile of May 1, 1998, to XXXXX concerning the application of the Goods and Services Tax (GST) to your operations. I apologize for the delay in responding to your request.

Interpretation Requested

Where a lease of tangible personal property (TPP) has been entered into prior to February 15, 1998, with Indians and Indian bands in the XXXXX, will lease payments after that date be subject to the GST?

As per our February 10, 1999, telephone conversation, you have advised that we need not respond to your question regarding leases of non residential real property at this time.

Interpretation Given

As a result of land claim and settlement agreements, Indians and Indian bands in the XXXXX no longer benefit from the tax relief provided by section 87 of the Indian Act. Effective February 15, 1998, supplies of TPP made to Indians and Indian bands in the XXXXX that were previously relieved of the GST are now subject to the tax.

However, agreements for the lease of TPP by Indians and Indian bands in the XXXXX entered into prior to February 15, 1998, that met certain documentary requirements and delivery requirements at the time first possession of the TPP was given, will be relieved of GST for the duration of the lease.

This policy also applies to band-empowered entities as long as certain additional conditions on page 4 of Technical Information Bulletin B-039R "GST Administrative Policy: Application of GST to Indians" are met. For your convenience, a copy of Technical Information Bulletin B-039R "GST Administrative Policy: Application of GST to Indians" is enclosed.

The delivery and documentary requirements are:

Vendor Documentation

Indian Individual

When the purchaser was an Indian individual, vendors must have maintained adequate evidence that a sale was made to an Indian, as registered under the Indian Act. Revenue Canada will accept as adequate evidence, notation on the invoice or other sales document which is retained by the vendor, of the nine or ten digit registry number or the band name and family number (commonly referred to as the band number/treaty number).

Indian Bands and Band-Empowered Entities

When the purchaser was an Indian band or band-empowered entity, a certificate must be provided and retained by the vendor that the property is being acquired by an Indian band or band-empowered entity or that the services are being acquired for band management activities.

The certification should be similar in wording to the following:

"This is to certify that the Name of band or band-empowered entity is acquiring property on the reserve or is acquiring services for band management activities. This supply will not be subject to the Goods and Services Tax."

Off-Reserve Purchases of Property Delivered to a Reserve

Along with the individual's Certificate of Indian Status card number or the certification by the Indian band or band-empowered entity, the vendor is required to maintain proof of delivery (e.g., waybill, postal receipt, freight bill, etc.), indicating the destination of the property to a reserve.

Delivery

The property must be on reserve or delivered to a reserve for the purchase to be relieved from the GST. The property must be delivered by either the vendor or an agent of the vendor.

Vendor

Where property was delivered to a reserve in the vendor's own vehicle, the vendor must maintain proof that delivery was made to a reserve. This will be indicated on the invoice of the vendor and the vendor's internal records, e.g., mileage log, dispatch records. Such proof must be maintained in addition to the proof of Indian status or certification by an Indian band or band-empowered entity.

Normal GST rules will apply where an Indian, Indian band or band-empowered entity who is the purchaser takes possession of the property off reserve and delivers the property to a reserve in his or her own vehicle.

Vendor's Agent

Where the property was delivered by the vendor's agent to a reserve, the vendor must maintain:

•   proof of Indian status or certification by the band or band-empowered entity; and

•   proof of delivery being made to the reserve (e.g., a waybill, postal receipt showing a reserve address, etc.).

An agent of the vendor includes an individual or company under contract to the vendor for making deliveries (e.g., postal services, trains, boats, couriers, etc.). The vendor would normally bear all the risks of the agent during the course of the delivery as if these risks were the vendor's own, unless specifically covered in the agency agreement.

A carrier who is under contract with the recipient is not regarded as the agent of the vendor. In addition, undertakings by purchasers of property to deliver the property to themselves as agents of the vendor are not acceptable to the Department.

Exercising the Option to Purchase TPP Under a Lease

The exercise of an option to purchase TPP under a lease is a separate supply. Therefore, an option to purchase that is exercised by an Indian or Indian band in the XXXXX will be subject to GST even where the lease intervals were previously relieved of GST.

As noted above, this policy also applies to band-empowered entities as described in Technical Information Bulletin B-039R "GST Administrative Policy: Application of GST to Indians" are met.

On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%, to the extent that they are taxable supplies (which are not zero-rated), tax must be collected at the harmonized rate.

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) 957-1175.

Yours truly,

Don Gagnon
Educational Services and Indians Unit
Public Services Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate