16 January 2002 GST/HST Ruling 37363 - Import of Farm Equipment -

Dear XXXXX:

Thank you for your facsimile of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the equipment described below. We have not referred to the HST in our response.

Statement of Facts

Our understanding of the facts as presented is as follows:

The equipment is a XXXXX with a XXXXX. The unit is powered by a diesel engine and a generator.

The goods originate in the XXXXX and are subject to Customs Classification XXXXX[.] The equipment has an approximate value in Canadian dollars of $XXXXX - $XXXXX.

XXXXX

The equipment is used in preparing a straw/compost mixture for the cultivation of XXXXX during the pre-wetting and composting phase.

The front end drum picks up the straw/compost mixture, turns and wets the mixture which is then drawn through the equipment via an auger to an elevated conveyor belt for discharge or optionally, can be discharged into a XXXXX and then distributed onto a field via hydraulically driven spreader discs.

The capacity amounts to approximately XXXXX of compost per hour.

The equipment measures approximately XXXXX long, XXXXX wide and stands approximately XXXXX high.

The pick-up drum has special exchangeable teeth XXXXX to pick up the compost. A scraper is mounted below the pick-up drum to clear most of the compost from the floor. The pick-up drum is driven by two gearboxes with V-belt drives in combination with two XXXXX electric motors.

A spinner is mounted above the pick-up drum, to level the amount of compost fed to the machine.

The auger is installed behind the pick-up drum. The auger brings the compost to the intake section of the elevating conveyor. It is driven at each end by means of electric motors with a capacity of XXXXX and a gearbox with a V-belt transmission.

Three water supply tubes are installed in the interior of the XXXXX for watering the compost mixture. On both sides of the machine, there is a connection for attaching a water supply hose.

The drive of the XXXXX is by means of a diesel engine combined with a generator (priced separately) that provides the power for the various electric systems and motors. The generator is mounted on top of the machine in an enclosure.

The drive of the machine is by means of the front wheels powered by hydraulic wheel motors. It can move at variable speeds.

There is an operator command panel located on top of the machine for controlling the machine, its functions and components. Steering is done by push buttons that control the rear wheels. Stairs on both sides of the machine lead to the operator's and service platform.

The XXXXX is fed through the elevating conveyor attached to the XXXXX.

XXXXX

Two wheels and two castors are attached to the frame.

Two hydraulically driven spreader discs are attached to the frame. They distribute the compost mixture across the width of the XXXXX.

The conveyor belt drops into the top of the XXXXX. The XXXXX is classified as an accessory but is really necessary to the process. Without a XXXXX, it is difficult to maintain the internal temperature of the compost material.

The material is formed into a long, flat pile approximately XXXXX high and XXXXX wide.

The material is run through the XXXXX machine every few days.

Ruling Requested

What is the GST status of the above-described equipment when imported into Canada?

Ruling Given

The XXXXX and the XXXXX are taxable at 7% when imported into Canada.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Taxable supplies of goods and services made in Canada are generally subject to tax at 7%. However, "zero-rated" supplies of goods and services are subject to tax at 0%. Generally, when goods are imported into Canada they are not subject to GST on importation if they would be zero-rated when sold in Canada.

Since there are no provisions to zero-rate XXXXX, the equipment is taxable at 7% GST when imported.

Customs tariff item XXXXX is for XXXXX and does not contemplate a XXXXX. Please contact the Regional Customs Offices to determine a more appropriate classification for this machine. They may be contacted as follows:

Trade Administration Services
XXXXX

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9218.

Yours truly,

Kevin W. Smith
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate