10 October 2003 GST/HST Interpretation 43285 - Tax Status of the Service of Training Apprenticeship Students

Dear XXXXX:

This is in respect of your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) regarding courses provided by XXXXX the College XXXXX. We apologize for the delay in our response.

Our understanding of the facts is as follows:

•   The College is a public college as defined in subsection 123(1) of the Excise Tax Act (ETA). The College is also a registered charity within the meaning assigned by subsection 248(1) of the Income Tax Act and thus a public institution under the ETA. For periods prior to January 1, 1997, the College would have been considered a charity for purposes of the ETA.

•   The XXXXX has entered into an agreement with the College to purchase apprenticeship training courses for delivery to specified third parties (apprentices) according to training standards established by the XXXXX.

•   XXXXX

•   XXXXX.

•   XXXXX

§   XXXXX

§   XXXXX

§   XXXXX.

•   XXXXX.

•   The College has filed an election under section 6 of Part III of Schedule V to the ETA to deem the supply of Apprenticeship courses to be taxable for GST/HST purposes.

•   The courses provided by the College under the Apprenticeship program do not have equivalency for credit courses.

•   There are situations where a student may be granted exemption for a credit course in a degree or diploma program, but this is evaluated on a case-by-case basis.

Interpretation Requested

Whether supplies of apprenticeship training courses given by the College under contract with the XXXXX are exempt under section 6, 7, or 8 of Part III of Schedule V to the ETA.

Interpretation Given

Based on the information provided, it is not possible for us to determine if and under which sections of the ETA the apprenticeship training courses given by the College are exempt. However, we hope that the following information will provide the means to answer your question.

Section 6 of Part III of Schedule V to the ETA

Section 6 of Part III of Schedule V to the ETA exempts the supply of a service of instructing individuals in courses leading to, or for the purpose of maintaining or upgrading, a professional or trade accreditation or designation recognized by a regulatory body where the supply is made, among others, by a public college.

The expression "regulatory body" is defined in section 1 of Part III of Schedule V to the ETA as "a body that is constituted or empowered by an Act of Parliament or of the legislature of a province to regulate the practice of a profession or trade by setting standards of knowledge and proficiency for practitioners of the profession or trade."

The definition of regulatory body is sufficiently broad to include a government body or department, as long as one of the roles or function of the government body or department is to set standards of knowledge and proficiency for practitioners of the profession or trade.

XXXXX. If it is indeed the case, each of the courses given by the College has to be examined to determine if it leads to a professional or trade accreditation or designation recognized either by the XXXXX or by another regulatory body.

In the case where a course leads to such an accreditation or designation, the course given by the College can be exempt under section 6 of the ETA, unless the College has made an election under that section to exclude the supply of the instruction or administration of an examination in the course from the exemption under section 6.

Section 7 of Part III of Schedule V to the ETA

Included in the exemption in section 7 of Part III of Schedule V to the ETA is a supply made by a public college of a service of instructing individuals in, or administering examinations in respect of, courses for which credit may be obtained toward a diploma or degree.

Unlike section 6 and 8 of Part III of Schedule V to the ETA, there is no election available under section 7 of that same Part. Thus the supply of instruction or administration of examinations by the public college would still be exempt under section 7, even though the supply by the public college may qualify for an election under sections 6 or 8. The elections available under sections 6 and 8 do not render other applicable exemptions inoperative. That is, if other exemptions apply, the supply will still be exempt pursuant to those exemptions, notwithstanding that an election has been made pursuant to sections 6 or 8.

Given your statement (item #11) to the effect that a student may be granted exemption for a credit course in a degree or diploma program, the exemption in section 7 may apply to those supplies. The exemption in section 7 applies if "credit may be obtained toward a diploma or degree". Even in the case where the course does not automatically qualify towards a degree or diploma, but may, the supply of that course will be exempt under section 7.

Section 8 of Part III of Schedule V to the ETA

Supplies made prior to October 2000 amendment

Generally, section 8, as it read then, exempted a supply of instruction in respect of certificates, diplomas, licences, etc, that attested to the competence of individuals to practice or perform a trade or vocation where:

(a) the document, class or rating is prescribed by federal or provincial regulation;

(b) the supplier is governed by federal or provincial legislation respecting vocational schools; or

(c) the supplier is a non-profit organization or a public institution (or charity, prior to 1997).

Generally, an individual course is considered by the Canada Customs and Revenue Agency (the CCRA) to meet the "attest to the competence" criterion if the course is offered as a credit in a full-time program offered by the same institution on a pass/fail basis. Alternatively, where the course is not part of a full-time program, it is considered to attest to the competence of individuals to practise or perform a trade or vocation if it is offered on a pass/fail basis. In both instances, the pass/fail assessment must be based on an evaluation of the student's performance on a single, or series of, tests, graded materials or projects.

Where the College made a supply of instruction in respect of certificates, diplomas, licences, etc, that attested to the competence of individuals to practice or perform a trade or vocation, the supply would have been exempt under section 8, given that the College met the definition of public institution (or charity, depending on the due date of the consideration).

It should be noted that it was possible, for supplies made prior to the October 2000 amendment to meet the exemption requirements for both sections 6 and 8 of Part III of Schedule V to the ETA. As a result of no election available under section 8 for that time, even though an election was made under section 6, the supply was nonetheless exempt under section 8. It is possible that a supply can be characterized under more than one provision in Schedule V. Where the supply meets the requirements of an exempting provision, the supply is exempt, regardless of another provision that may permit an election to make an otherwise exempt supply taxable.

Supplies made after October 2000 amendment

Section 8 of Part III of Schedule V to the ETA, as amended by section 25 of Chapter 15 of the Statutes of Canada 2001, exempts the supply of a service of instructing individuals in, or administering examinations in respect of, courses leading to certificates, diplomas, licences or similar documents, or classes or ratings in respect of licences, that attest to the competence of individuals to practice or perform a trade or vocation, except where the supplier has made an election under the section.

An amendment to section 8 was the introduction of an election to exclude supplies from being exempt under section 8. The amendment adding the election applies only to supplies for which all of the consideration becomes due after October 4, 2000, or is paid after that day without having become due.

There are three criteria established by the ETA, each of which must be met in order for a supply of instruction to be exempt under section 8:

(a) the supply by the educational institution must be in respect of courses leading to certificates, diplomas, licences or similar documents, or classes or ratings in respect of licences;

(b) the competency gained by the students must relate to a trade or vocation (whether a course relates to a trade or vocation is a question of fact, but generally, courses in sport, games, hobbies, recreational or cultural pursuits, or courses designed for personal interest are excluded); and

(c) the certificate, diploma, licence or similar document must attest to the competence of the students to practise the trade or vocation.

As stated previously, supplies may fall under more than one exemption. If no other exemptions apply and both sections apply, the public college must make an election under both sections to ensure that the supply will not be exempt of GST/HST. An election under either sections 6, 8 or both is made using form GST29 Election and Revocation of the Election to Make Certain Supplies Taxable (enclosed).

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the ETA, 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 CCRA 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) 954-7936.

Yours truly,

Chantal Desrosiers
Manager
Charities, Non-Profit Organizations and Educational Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate