Section 133 - Agreement as Supply


Canada v. Cheema, 2018 FCA 45

s. 133 deemed an acquisition of future home on co-purchaser's signing purchase agreement, notwithstanding that no beneficial interest received on closing

In order to satisfy lender requirements, the individual taxpayer (Mr. Cheema) persuaded a friend (Dr. Akbari) to jointly sign an agreement for the purchase of a new home. The Ontario new housing rebate rules required that each individual who becomes liable under the purchase agreement is acquiring the new house as the primary place of residence of that individual or a relation.

Stratas JA (speaking for the majority, with Webb JA dissenting) found that Dr. Akbari’s co-signing of the purchase agreement precluded access to the rebate, stating that the fact that Dr. Akbari “had no beneficial interest in the property” was “irrelevant” (paras. 93-94) as what mattered was that Dr. Akbari became liable to the builder under the purchase agreement when he signed it.

This determination turned in part on the breadth of s. 133, which effectively deemed Dr. Akbari to have acquired the new home at the time of signing the agreement. Stratas JA stated (at paras. 100, 101, 102):

As Mr. Cheema and Dr. Akbari both signed the agreement of purchase and sale, they are deemed to receive a supply of the property at the time they entered into the agreement. …

Deeming provisions create legal fictions. They assume things to exist even when they do not in reality—like, for example, the supply of a home that is not yet constructed. …

Other elements found in the text, context and purpose of the statute support the interpretation that supply means the signing of an agreement of purchase and sale and not a transfer of beneficial ownership.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 254 - Subsection 254(2) - Paragraph 254(2)(b) third party who did not intend to occupy was liable at the purchase agreement time 355
Tax Topics - Statutory Interpretation - Ordinary Meaning Court should not depart from usual interpretation principles in seeking a sensible result 128
Tax Topics - Statutory Interpretation - Ease of Administration interpretation that favours administrative efficiency is to be favoured 206
Tax Topics - Excise Tax Act - Regulations - New Harmonized Value-Added Tax System Regulations, No. 2 - Section 40 co-purchaser with no intended beneficial interest was required to satisfy ETA s. 254(2) rules 171
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) "legal acquirer" rather than intended beneficial owner was the purchaser 219

Fedak v. R., [1999] GSTC 65

s. 133 deemed trade-in supply to occur on agreement date for purposes of non-application of new trade-in rules

Pursuant to an agreement entered into in March 1996, the Appellant bought a boat for $23,000, traded in a used boat for $6,000 (with such deliveries occuring in May 1996), but was charged GST on the full $23,000.

As the agreement to buy the new boat and trade in the old boat was entered into in March 1996, the new trade-in rules (in s. 153(4)), which applied to supplies "made" after April 23, 1996, did not apply, with the result that the Appellant was not entitled to claim a rebate with respect to the GST charged to him on the $6,000 of the purchase price.

Attorney General of Canada v. Metropolitan Toronto Hockey League, [1995] GSTC 31 (FCA)

s. 133 establishes a timing rule that avoids double taxation

Stone J.A., in disagreeing with a conclusion of the trial judge that the effect of s. 133 was to deem the provision of property under an agreement to be part of one supply and not separate supplies for purposes of paragraph 25(f) of Schedule V, Part VI as it had read, found that the "and" appearing at the end of s. 133(a) signified that (a) and (b) were to be read together. As so read, the section simply indicated that where in the circumstances described in s.(a) GST must be paid, the transaction will not be subject to GST at the time the property or service is actually provided.

See Also

1410109 Ontario Ltd. v. The King, 2022 TCC 141 (Informal Procedure)

tips included in contract were part of the agreed-to consideration

The contract of an incorporated banquet hall with its event customers stipulated: “All Pricing is Subject to 13% HST and 15% Gratuities.” Before agreeing with the position of the Minister that the “gratuity” was part of the consideration for the supply under the contract, Bocock J referred inter alia to U.K jurisprudence that:

[V]oluntary gratuities are not subject to VAT because voluntary gratuities are: ‘[N]o part of the contract that the customer should pay a charge for service … .’

He dismissed the taxpayer’s appeal, on the basis that the gratuities were not voluntary, stating (at paras. 27-28):

Subsection 133(b) combined with subsection 138(a) … suggests that tips included in an agreement are part of the overall supply of prepared meals, which is subject to HST. …

The ETA defines “consideration” as “any amount that is payable for a supply by operation of law.” The almost mandatory tip is enforceable by operation of contract law whereas a voluntary tip is not “consideration” because it is not payable by operation of law… .

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Consideration a “gratuity” stipulated in the contract was part of the consideration 247

Great Land (Olive) Inc. v. The Queen, 2022 TCC 56

condos were supplied when they were conditionally agreed to be built

The appellant prior to October 30, 2007 (the date of announcement of the GST rate reduction from 6% to 5%) entered into agreements (the “Pre-November Agreements”) with numerous buyers to sell them (on a GST-included basis) condo units in a project (the “Mona Lisa”) that had not yet received site plan approval or a building permit, conditional on various conditions being satisfied. The closings occurred in 2010. The transitional provision indicated that the reduced rate applied inter alia “to any supply … made on or after January 1, 2008.”

In finding that there were supplies of real property under the agreements that occurred prior to 2008, so that the 6% rate applied, D’Arcy J. stated (at para. 45):

[There] was a supply that was made at the time the Appellant entered into the Pre-November Agreements of Purchase and Sale with the Buyer. The Appellant provided the Buyer with the sole right to acquire the specified Condo Unit if the conditions were satisfied and the Mona Lisa was built and registered as a condominium. This was the provision of something and thus constituted a supply.

In further finding that, in any event, s. 133 deemed the agreements to be supplies of the condos, he stated (at paras. 56-58):

[T]he section does not contain wording that requires there to be an unconditional agreement to provide property or services. It merely requires the parties to have entered into an agreement to provide property or a service. …

Further, the use of the words if any in paragraph 133(b) support a finding that for the purposes of section 133, an agreement that is conditional is still an agreement for purposes of the section. …

The application of section 133 is also not contingent on the existence of the Condo Units at the time the parties entered into the Pre-November Agreements of Purchase and Sale.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 225 - Subsection 225(1) - A - Paragraph A(a) GST under a GST-inclusive agreement was collected at a 6% rather than 5% rate (and computed on too large an amount), so that the over-collected tax had to be remitted 385
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply supply of condos still to be built occurred when agreement was entered into 210

2137691 Ontario Limited. v. Lucia Pessoa Park, 2018 ONSC 4218

supply of land occurred at the closing

The Plaintiff sold to the Defendant the middle lot of a three-lot property over which a home had spread. This middle lot contained a pool house and hallway structure that connected to the rest of the home on the other two lots. The sale agreement (“APS”) required that any existing structures be demolished by the vendor, but this did not occur until 45 days after closing.

After having described a submission of the plaintiff (who sought to recover HST on the sale) that referenced ETA s. 133, Coats J found that “the time of the supply is the time that the deal closes” (para. 57) and the “material time for the determination of whether the property was a ‘residential complex’ and ‘residential unit’ subject to an HST exemption is the time of closing” (para. 58).

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Residential Complex exemption applied to the sale of a portion of a large home 376
Tax Topics - Excise Tax Act - Section 224 registrant could bring a motion for declaration that HST was owing to it without complying with s. 224 272
Tax Topics - Excise Tax Act - Section 194 purchaser entitled to rely on Statutory Declaration of the Vendor as to exempt status 344

Commissioner of Taxation v MBI Properties Pty Ltd, [2014] HCA 49

honouring of an executory contract entails a second supply

"South Steyne," which owned strata-titled apartments comprising the guest rooms of a hotel, leased each of those apartments to "Mirvac," and then sold three of those apartments to the respondent ("MBI"), which remained subject to the leases to Mirvac.

The High Court held that each apartment lease, as an executory contract, obliged MBI to give Mirvac use and occupation of the apartment throughout the term of the lease in consideration for the periodic payment of rent, so that MBI's observance of this continuing obligation was properly characterized as an intended supply of residential premises by way of lease by it to Mirvac which was input taxed under s 40-35 of the Australian GST legislation. The Court stated (at paras. 35, 38):

A transaction which involves a supplier entering into and performing an executory contract will in general involve the supplier making at least two supplies: a supply which occurs at the time of entering into the contract, in the form of both the creation of a contractual right to performance and the corresponding entering into of a contractual obligation to perform; and a supply which occurs at the time of contractual performance, even if contractual performance involves nothing more than the supplier observing a contractual obligation to refrain from taking some action or to tolerate some situation during a contractually defined period. …

Once the general operation of the GST Act is understood in that way, it is apparent that there is no warrant in the text or policy of the GST Act for reading the reference in the special rule in s 40-35 to a supply of "residential premises" that is a supply "by way of lease" as referring to the supply which occurs at the time of entering into the lease but not as referring to the further supply which occurs by means of the lessor observing and continuing to observe the express or implied covenant of quiet enjoyment under the lease. The reference encompasses both, and both are therefore input taxed.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply "supply" may not entail action 122

Administrative Policy

May 2019 CPA Alberta CRA Roundtable, GST Session – Q.8

s. 133 determines time of acquisition for ITC purposes

In finding that input tax credits can generally be claimed by a builder for invoices issued subsequent to the date of self assessment on substantial completion and first occupancy of a multiple unit residential complex (a “MURC”) for work done by suppliers for goods and services sold/installed performed prior to the first tenant move-in, CRA stated:

Under section 133, a supply of property or a service is generally considered to be made at the time that the agreement to provide the property or service is entered into. Therefore, where a builder of a MURC agrees to acquire property or a service for consumption or use in constructing the MURC, the supply of the property or service is generally considered to be made to the builder at the time that the agreement is entered into (that is, the builder is considered to be the recipient of the supply at that time).

The time at which the consideration for a supply of property or a service becomes due under section 152 … does not impact the time at which the supply is considered to be made, nor does that time impact the purpose for which the recipient of the supply acquired the property or service. …

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 169 - Subsection 169(1) ITCs can be claimed by builder after s. 191(3) self-assessment date for work done before but not after that date 326
Tax Topics - Excise Tax Act - Section 191 - Subsection 191(3) supplies acquired prior to self-supply time generate ITCs even if only invoiced later 125
Tax Topics - Excise Tax Act - Section 141.01 - Subsection 141.01(2) purpose of acquisition is assessed at time agreement is entered into 214

8 September 2017 Interpretation 180362

supply made when master sales agreement entered into
175518 is similar

S. 144 provides that “a supply of goods that have been imported … but have not been released [by the CBSA] before the goods are delivered … to the recipient of the supply, shall be deemed to be made outside Canada,” so that even if the vendor is a registrant, it is not required to charge GST/HST. CRA considered that s. 144 does not apply if the goods were supplied by the vendor before they were imported and, in this regard, applied s. 133, which deems goods to be supplied at the time that the sale agreement is entered into. Accordingly, in an example where a registered non-resident enters into a somewhat long-term agreement for the supply of fuel oil to Canco, and thereafter delivers the fuel oil to Canco at a Canadian port, CRA considered that s. 144 does not relieve the non-resident from the requirement to charge GST/HST notwithstanding that the fuel oil has not yet been released at the time of its delivery in Canada. In this regard, CRA stated:

Under section 133, the supply of the goods is deemed to be made when the agreement for the supply of the goods is entered into. … The relevance of the timing of when a supply is made under section 133 to the application of section 144 is reflected in the wording of the definition of "specified supply" of goods under subsection 178.8(1) … [which] distinguishes between a supply of goods that are imported after the supply is made, and a supply of goods that have been imported in circumstances in which section 144 deems the supply to have been made outside Canada. …

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 144 GST/HST exemption for supplies of goods before their release unavailable where sales agreement concluded before importation 277

Excise and GST/HST News – No. 96 under "University and public college meal plans" June 2015

assimilation of supply to agreement

Sched. V, Part III, s. 13 exempts the supply, under a meal plan that is for at least one month, by universities to their students of the right to receive at least 10 meals weekly throughout the meal plan period for a single consideration. CRA considers that these requirements are not breached if there are "top-ups," i.e., the addition of funds to the plan, and that:

The tax status of a supply… is to be determined at the time the student initially enters into the agreement with the supplier and will not be affected if, at the end of the plan period, unused funds are refunded or carried over for use in the future…[or] the plan is cancelled… and unused funds are refunded.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Schedules - Schedule V - Part III - Section 13 assimilation of supply to agreement 167

CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 15. ("Carrying on Business")

carrying on business in Canada determined at time supply agreement entered into

An unregistered non-resident enters into an agreement to supply and install a power generation facility inside Canada with the installation to take about eight months. Subsequently, it assigns the "in Canada" services portion of the contract to its Canadian subsidiary, and the parties and the Canadian subsidiary enter into a restated contract under which these respective roles are set out. In determining whether the non-resident "carries on business" in Canada, will the CRA look to the time of signing of the contract, or to its conclusion; and does the restated agreement represent a "novation" resulting in the cancellation of the original supply in favour of two new supplies by the resident and the non-resident? CRA essentially did not answer the 2nd question, and respecting the 1st stated:

The determination of whether a non-resident is carrying on business in Canada is generally made based on a complete set of facts at the time the non-resident enters into an agreement to make taxable supplies in Canada and those supplies are deemed to be made.

GST/HST Memorandum 3.1, “Liability for Tax” (August 1999)

s. 133 subjects advance payments to tax

49. Agreement as supply (s 133)—...The entering into of any agreement to supply any property or any service is deemed to be a supply of the property or service made at the time the agreement is entered into. The provision of the property or service under the agreement is treated as being a part of the same supply and not as a separate supply. As a result, the tax applies to any prepayment or part payment of the consideration for a supply even if, at the time payment is made, property has not in fact been transferred or the service has not yet been rendered