29 September 2000 GST/HST Interpretation 30908 - Tax Treatment of the

SUBSEQUENT TO THIS RULING, ADDITIONAL INFORMATION WAS SUBMITTED WITH THE RESULT THAT A REVISED RULING LETTER WAS ISSUED ON FEBRUARY 23, 2001. PLEASE REFER TO CASE # 35035.

Dear XXXXX

Thank you for your letter of April 17, 2000, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of the XXXXX course made by the XXXXX ("the Centre"). Your letter was originally sent to our XXXXX office, but was subsequently forwarded to our office for final reply. Our comments are set out below.

Please note that our reply is in the nature of an interpretation rather than an application ruling. Application rulings represent our opinion on how a provision(s) of the Excise Tax Act applies to a given set of facts. If the facts are incomplete or uncertain, or are currently subject to an audit (as in this situation), it is generally our practice to issue an interpretation letter, which explains in more general terms how the Act applies. Our understanding of the facts is set out below.

1. The Centre is a XXXXX registered as such under the XXXXX XXXXX Act of XXXXX. It was founded in XXXXX to provide courses to students who wish to improve their XXXXX. Human Resources Development Canada certified the Centre as a Certified Educational Institution for the purposes of Section 118.5 and 118.6 of the Income Tax Act, thus entitling the Centre to issue tax receipts for tuition deduction. The Centre is registered for GST and has been collecting, but not remitting, the tax.

2. The Centre offers two types of courses. The first is a XXXXX course designed for business and professional groups, on which GST is charged. The other is the XXXXX course conducted for individual students who wish to improve their XXXXX. Students may take the XXXXX course to assist them in passing scholastic aptitude tests in XXXXX, which are often used as prerequisites for admittance to many professional fields of study. Also, high school guidance counselors refer school students who are having difficulty in their XXXXX to the Centre. The Centre has also taught many high school teachers how to assist their students to improve their XXXXX.

3. The XXXXX course is taught by XXXXX, an XXXXX certified school teacher. In this course, XXXXX teaches XXXXX. Many of the books and materials used by the Center to teach the XXXXX course are the same as those used in the XXXXX Board of Education curriculum.

4. With respect to course content, the XXXXX course begins with XXXXX. The weekly classes are conducted on a workshop basis including lecture drills and hands-on application of the techniques. Students are required to practice in their own material during the week and report back on their progress at the next class. XXXXX.

Special emphasis is placed on XXXXX. Students also use their course textbooks in class for a more specific application. Emphasis is not only placed on understanding technical material, but remembering it and recalling it later.

5. Testing is done at the beginning, end and during the XXXXX course to measure the level of proficiency in different areas. A file is also kept for each student including their test results, and a course completion card is issued upon successful completion of the program.

6. The XXXXX course is not approved for credit by a school authority.

7. The student population of the Centre is as follows: there are no elementary school students; 10% of the students are in high school; and 90% of the students are in university or studying for university entrance exams.

Interpretation Requested

Is the supply of the XXXXX course subject to GST or is it exempt pursuant to section 9 of Part III of Schedule V of the Excise Tax Act ?

Interpretation Given

Section 9 of Part III of Schedule V, which exempts certain supplies of tutoring and instruction, is set out as follows:

"9. A supply of a service of tutoring or instructing an individual in

(a) a course that is approved for credit by, or that follows a curriculum designated by, a school authority;

(b) a course that is a prescribed equivalent of a course described in paragraph (a); or

(c) a course the successful completion of which is mandatory for admittance into a particular course described in paragraph (a) or (b) and not for admittance into any other course that is a prerequisite to the particular course."

On the basis of the above, the supply of the XXXXX Course would be exempt under this provision only if it meets the requirements under either paragraphs (a), (b) or (c).

Concerning the requirements under paragraph 9(a), it does not appear that the XXXXX Course is a course, or is tutoring in a course, that has been approved for credit by a school authority.

It is our view that paragraph 9(a) could also apply to tutoring or instruction in material from lower grades or in general concepts dealing with the specific, relevant subject matter of a credit course in order to assist a student to understand material contained in a credit course. Following from this, in order for the exemption to apply, it must be evident that there is some connection or relationship between the supply of instruction or tutoring in question, and the credit course(s) offered by a school authority. Usually, this connection or relationship would not be found with respect to tutoring in matters such as XXXXX or XXXXX XXXXX since, generally, such instruction is too broad to be considered as relating to the specific, relevant subject matter of any particular school credit course(s).

At this point, it is worth noting that the clause in paragraph 9(a), "... or that follows a curriculum designated by, a school authority" refers, in part, to situations where, for lower grades, there may not be course "credits" but there will be a "curriculum." Since XXXXX are generally part of a school curriculum for the lower grades, tutoring or instruction in XXXXX, for the purpose of assisting children meet the requirements of their school curriculum, will generally meet the requirements of this paragraph where children are concerned.

Finally, it is our understanding that the large majority of the Centre's students are not elementary or secondary school students. This would be further indication that its course would not be one that is "approved for credit" or "follows a curriculum" of a school authority. By definition in subsection 123(1) of the Act, a school authority refers to a provincially recognized elementary or secondary school. The fact that the Centre may use books and materials that are approved or used by a school authority would not, of itself, be sufficient to substantiate that the course "follows a curriculum" designated by a school authority.

It does not appear that paragraph 9(b) is applicable in this case, as it refers to courses that are prescribed equivalents to courses in paragraph 9(a). This refers only to music lessons, pursuant to the Equivalent Courses (GST) Regulations.

Paragraph 9(c) is also not applicable, it appears, since the XXXXX course is not mandatory for admittance into a course described in paragraph 9(a) and is not for admittance into any other course that is a prerequisite to a course described in paragraph 9(a).

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. The 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 Canada Customs and Revenue Agency 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) 952-9215.

Yours truly,

Pauline Greenblatt
Charities, NPO's and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate