Section 153

Subsection 153(1) - Value of Consideration


Global Cash Access (Canada) Inc. v. Canada, 2013 FCA 269

"consideration" under law of contract

In the course of finding that the appellant was receiving a financial supply from the casinos it contracted with, Sharlow JA stated (at para. 15):

In the context of this appeal, the word "consideration" should be understood to mean anything that would be consideration under the law of contract, and "taxable supply" should be understood to include anything supplied in the course of a commercial activity except a "financial service" as defined in subsection 123(1) of the Excise Tax Act. It is undisputed that the business of the Casinos is a commercial activity, and the acts of Casinos pursuant to its contract with Global are acts in the course of that commercial activity.

Words and Phrases
Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Consideration "consideration" under law of contract 123
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Service - Paragraph (g) commercial efficacy of arrangement involving kiosk and support services turned on the advance of money 428
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply three elements integrally connected 240
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Service - Paragraph (r.4) predominant element not described in (r.4) or (r.5) 183

Canada v. Costco Wholesale Canada Ltd., 2012 FCA 160

payments by credit card company to store were not merely discounts to its fees

The appellant ("Costco") entered into a conventional "Merchant Agreement" with the Amex Bank of Canada ("Amex") pursuant to which it agreed to pay the discount fees of Amex, and at the same time entered into a "Co-Branding Agreement" under which it agreed to accept only Amex credit cards and Amex agreed to make payments to it equal to Y% of the discount fees earned by it.

In finding that the Y% payments were consideration for a taxable supply by Costco, Sharlow JA stated (at paras. 44-45):

The value to Amex of exclusivity is readily discernible from the contractual terms. Every Costco sale on a credit card other than an Amex credit card would reduce the value to Amex of the entire co-branding arrangement. …

In my view, the interpretation of the contracts that is more consistent with the language of the contracts and the undisputed facts is that [such] payments were consideration paid by Amex to Costco, either for Costco entering into the Co-Branding Agreement, or specifically for the exclusivity provision.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Service - Paragraph (l) Costco agreement to use Amex cards exclusively was "arranging for" support of Amex's supply of credit 238

See Also

A Oy v. Veronsaajien oikeudenvalvontayksikkö, [2019] EUECJ C-410/17 (10 January 2019) (European Court of Justice (9th Chamber))

demolition contract entailed reciprocal supplies of dismantling services and scrap

Pursuant to demolition contracts, a company undertook to demolish old factory buildings with responsibilities that included the disposal and processing of materials and waste. It took the estimated sales proceeds of the scrap metal and other materials generated into account in quoting its price for the work but did not communicate this estimate to the customer. The company also undertook dismantling contracts under which the equipment and materials to be removed had an estimated value such that the company would pay the customer to enter into the contract (rather than being paid to perform the dismantling).

The 9th Chamber held in both cases there was a reciprocal supply of a demolition or dismantling service and of goods (the removed materials or equipment) for VAT purposes. In the first case,

the supply of recyclable scrap metal is made for consideration if the person acquiring it, namely a demolition company, attributes a value to that supply which it takes into account in the calculation of the price quoted for carrying out the demolition works (para. 40)

with the consideration it received for its demolition work effectively being grossed up by this estimated amount.

Similarly, in the second (dismantling) case (paras. 57, 59:

[T]he value of the performance of dismantling and waste disposal … must be regarded as equal to the amount that the purchaser, that is a demolition company, takes into account as a factor reducing the purchase price of the goods to be dismantled.

…[T]he taxable base of the supply of goods to be dismantled is, therefore, constituted by the price actually paid for the purchase of those goods and the amount corresponding to the factor applied by the purchaser in order to reduce the purchase price proposed.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Consideration a demolition contract entailed a barter exchange of dismantling services and scrap 403

ING Intermediate Holdings Ltd v HMRC, [2017] EWCA Civ 2111

interest paid by bank to depositors was reduced by implied fees earned as consideration going to the bank

Although accepting (per BLP) that a mere borrowing by a company is not a supply by it, Arden LJ confirmed the finding below that the services provided by ING to its on-line depositors (including 24-hour access to their deposits) were more than merely “peripheral” to the borrowing represented by the deposits, so that ING was engaged in an exempt banking business. In finding that ING was also making such supplies for consideration notwithstanding that it advertised itself as providing “no fee” banking, she stated (at para. 46, adopting findings below):

[T]he contract was one of barter. The bank provided the banking facilities and interest payments in exchange for the making of the loan. … The provision by the customer of the loan was the consideration for both the payment of interest and the provision of the banking services.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply services provided in deposit-taking business were more than peripheral so that supplies were made 290
Tax Topics - General Concepts - Substance court only goes behind the contract if the contract does not reflect the true agreement 187
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Service - Paragraph (c) borrowing is not by itself a supply by borrower 69

GEM Health Care Group Limited v. The Queen, 2017 TCC 13

no barter of management services for HST purposes between two affiliates employing the same key manager

An individual (Mr. Hussain), who was the CEO of a Canadian corporation (“GEM”) which directly and through subsidiaries (including “Melville Ridge“) was engaged in the nursing home business, was also the key employee of Melville Ridge. GEM provided and charged for various management services it provided to its subsidiaries, including Melville Ridge, but it reduced the fee charged to Melville Ridge by the amount of Mr. Hussain’s salary with Melville Ridge to reflect that, as Mr. Hussain was also an employee of Melville Ridge, his services were not provided to Melville Ridge.

CRA took the position that the arrangement between GEM and Melville Ridge constituted two separate supplies, one being a supply of services (including services performed by Mr. Hussain in his capacity as an employee of GEM) supplied by GEM to Melville Ridge, and the other being a supply of services (including services performed by Mr. Hussain in his capacity as an employee of Melville Ridge) supplied by Melville Ridge to GEM. and added to the management fees receivable by GEM a non-cash component (being the value of the services provided on this theory by Melville Ridge to GEM).

In rejecting this approach, Sommerfeldt J stated (at para. 91):

The approach taken by the CRA is based on the premise that the services of Mr. Hussain flowed in both directions (i.e., GEM provided the services of Mr. Hussain to Melville Ridge, and Melville Ridge provided the services of Mr. Hussain to GEM), and seems to suggest an element of circularity. Furthermore, the CRA’s approach seems peculiar in that, as Mr. Hussain was an employee of GEM, there was no reason for Melville Ridge to make the services of Mr. Hussain available to GEM in the manner suggested by the CRA, and, as Mr. Hussain was an employee of Melville Ridge, there was no reason for GEM to make the services of Mr. Hussain available to Melville Ridge.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 232 - Subsection 232(3) issuance of credit note is mandatory for ITC claim 165
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Recipient no barter of managment services between affiliates/construction supplies acquired by parent as agent for owner-subs 196
Tax Topics - General Concepts - Agency construction supplies acquired by parent as agent for subsidiary owning the real estate 390

Invesco Canada Ltd. v. The Queen, 2014 TCC 375

discounted management fees charged by manager to MFTs not grossed up by MFT distributions of the discounts to large unitholders

The appellant, which was the manager (and also trustee) for various mutual fund trusts (the "Funds"), arranged that large investors in the Funds, such as pension funds, would bear lower Fund management fees than those which otherwise would be charged by it to the Funds. Initially, this was accomplished through fee refunds paid by the appellant to the large investors. However, in 1994 CRA indicated (in 9332265) that these refunds would be treated as "inducement payments," to be included in the Funds' incomes under ITA s. 12(2.1) (thereby resulting in double taxation.)

Under restructured arrangements:

  1. the weekly management fees charged by the appellant to the Funds were reduced to reflect the "net" management fees agreed with the larger investors, with a corresponding reduction in the GST collected; and
  2. the Funds made special "Management Fee Distributions" to the large investors on a monthly or quarterly basis equal to the difference between the "gross" management fees they otherwise would have borne and the net management fee amounts.

The Minister considered that the Fund obligations to pay the Management Fee Distributions to the large investors was part of the consideration that the Funds provided in exchange for the appellant's services, and assessed the appellant for failure to charge GST on the gross amounts.

Campbell J allowed the appellant's appeal. The Minister's position depended on the special distribution amounts being owed by the appellant to the large investors (para. 53). However, it was the Funds' own trust declarations that created the obligation to make the special distributions - the obligation was never the appellant's (paras. 64, 68, 85). In other words, the management fees were "discounted at the point of sale" and it was only this net amount that was payable to the appellant (para. 80). Furthermore, there was a time lapse between the weekly payment of the reduced management fees and the eventual monthly or quarterly special distributions (para. 54).

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Consideration management fee distributions to large MFT unitholders 169
Tax Topics - General Concepts - Evidence evidence of surrounding circumstances including income tax objective relevant to contract interpretation 170

GF Partnership v. The Queen, 2013 TCC 53, aff'd 2013 FCA 260

recoupment of development charges included in consideration

The registrant ("Mattamy"), which was a housing developer, paid municipal development levies at the time it entered into a subdivision agreement with the municipality, or when the municipality issued building permits. The sales agreements with home purchasers stated the parties' agreement that "as part of …the Purchase Price herein, the Vendor has or will pay on behalf of the Purchaser…all applicable development charges…." Mattamy did not collect GST (aggregating $15 million) from the purchasers on amounts reimbursing it for the relevant development levies which had been charged to it (on a GST-exempt basis) by the municipality.

Woods J concluded that under the clause quoted above, it was agreed that "Mattamy pays the development charges on its own account, but for the ultimate benefit of Purchasers" (para. 36): first, the development charges often were paid by Mattamy prior to executing a sales agreement with its supposed principal, and were not payable if the purchaser terminated the sales agreement; and second, the agreement stated that the development charges were part of the purchase price (implying that they were paid by Mattamy on its own account).

Accordingly, the recoupment of the development charges by Mattamy was part of the sales consideration received by it, and was subject to GST.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 154 - Subsection 154(1) 136
Tax Topics - Excise Tax Act - Section 254 - Subsection 254(6) developer ought to have known that development levies not incurred by it as agent 296
Tax Topics - Excise Tax Act - Section 296 - Subsection 296(2) 159

British Columbia Transit v. The Queen, [2006] GSTC 103, 2006 TCC 437

lease consideration not nominal because of property tax obligation

The appellant leased a transit system to another municipal transit entity for rent of $1 per year, but with the lessee being obligated to pay municipal taxes imposed on the leased premises (which amounted to around $2 million per year). C Miller J noted that this obligation represented non-nominal consideration for the lease. See summary under s. 141.01(1.1).

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 141.01 - Subsection 141.01(1.1) lease consideration not nominal because of property tax obligation 174
Tax Topics - Excise Tax Act - Section 141.01 - Subsection 141.01(3) lessor required to demonstrate taxable-supply-for-consideration purpose 148
Tax Topics - Excise Tax Act - Section 306.1 - Subsection 306.1(1) additional reasons can be raised in Notice of Appeal 248

Customs and Excise Commissioners v. Tron Theatre Ltd., [1994] BTC 5028 (Ct. Ses. (I.H.))

A theatre company which invited members of the public to sponsor a new seat in the theatre by paying £150, and which provided such subscribers with a personalized brass plaque displayed on the seat, an acknowledgement in its main foyer and a limited edition print by a Glagow artist, was liable to VAT on the total proceeds received pursuant to s. 10(2) of the Value Added Tax Act, 1983 (which provided that "if the supply is for a consideration in money its value shall be taken to be such amount as ... is equal to the consideration"), notwithstanding evidence that the payments included an extremely large element of donation.

Trafalgar Tours Ltd. v. Customs and Excise Commissioners, [1990] BTC 5003 (C.A.)

The taxpayer organized overseas coach tours and received 80% of the tour price listed in the brochure from its Bermudan parent. It was found that the taxpayer was the person with whom the passengers contracted and that sums paid by the passengers to overseas subsidiaries of the Bermudan parent were received by the subsidiaries for and on behalf of the taxpayer through a chain of agency arrangements, and that the only reason why the taxpayer did not actually receive the full sums paid by the passengers was that it permitted sums to be deducted by the overseas subsidiaries by way of commission for their respective services in marking the tours on behalf of the taxpayer. Accordingly, the "consideration" received by the taxpayer for the supply was the full price, rather than 80% thereof. Slade L.J. stated that (p. 5012) "the concept of receipt for this purpose is not to be confined to mere physical receipt; anything which is received by persons for and on behalf of the supplier must be treated for this purpose as received by the supplier himself".

Boots Co. plc v. Customs and Excise Commissioners, [1990] BTC 5064 (Ct. J.E.C.)

Boots operated a sales promotion scheme under which it distributed to its customers coupons which entitled the customer upon presenting the coupon for the purchase of other specified goods to a reduction in the price of those goods. The consideration which Boots received for those goods did not include the value of such coupons which were presented to it:

"It is clear from the coupon's legal and economic characteristics ... that, although a 'nominal value' is indicated on it, the coupon is not obtained by the purchaser for consideration and is nothing other than a document incorporating the obligation assumed by Boots to allow to the bearer of the coupon, in exchange for it, a reduction at the time of purchase of redemption goods. Therefore, the 'nominal value' expresses only the amount of the reduction promised." (p. 5073)

Administrative Policy

Taxable Supplies - Special Cases [CRA website]

Commercial leases

…Property taxes paid by a tenant are to be treated as part of the payment to the landlord for the rental of the real property, even if the tenant pays the taxes directly to the municipality. Therefore, the amount of property taxes payable by a tenant is considered to be part of the rent and is subject to GST/HST in the same way as the amount of rent payable by the tenant. This will be the case whether or not the rental agreement states that the payment of property taxes by the tenant is to be considered as "rent" or "additional rent."

However, if a tenant is directly liable to the municipality for the payment of property taxes, this amount is not subject to GST/HST. ...

Early-payment discounts and late-payment surcharges

If you offer an early-payment discount on credit sales, you have to charge GST/HST on the full invoice amount even if your customer takes the discount. …

Tips and gratuities

…A tip or gratuity that is freely given by a customer, for example, cash not recorded on a bill, is not subject to the GST/HST.

23 December 2013 Internal T.I. 2013-0514701I7 - Bitcoins

sale for Bitcoins

When asked to address the HST/GST consequences of buying and selling goods in exchange for Bitcoins, CRA stated:

[W]here a taxable supply… is made and the consideration for that supply is Bitcoins, the consideration for the supply is deemed to be equal to the fair market value of the Bitcoins at the time the supply is made… .For example, if a GST/HST registrant sells a good for 10 Bitcoins and the sale is subject to GST/HST, the registrant will be required to collect the GST/HST calculated on the fair market value of the 10 Bitcoins at the time of the sale.

31 July 2012 Interpretation Case No. 103548

development levy

A developer who applies for a development permit or subdivision approval may be required by the municipality to pay a levy, or to construct, or pay for the construction of, municipal improvements (which potentially may be in excess of those required to support the particular contemplated development), with such improvements becoming municipal property. In the excess capacity situation, fees collected from subsequent developers generally are used by the municipality to reimburse this developer's costs.

The development levy will be considered to be consideration for an exempt supply of a permit or similar right under Sched. V, Part VI, s. 20(c). Although the supply of the construction services by the developer will be considered to be a taxable supply, no GST or HST will be payable by the municipality if this supply is made for no consideration. Fees collected by the municipality from subsequent developers would generally become consideration for a taxable supply when the fees are used to reimburse the developer.

29 July 2011 Headquarters Letter 95868

card loyalty program credits

A credit card loyalty program is proposed in which participating organizations (Organizations C) assist in the marketing of credit cards of a particular credit card company (FinanceCo). By using the credit card, members of Organizations C accumulate various member rewards which they may apply to purchase rewards from Organizations C. Amounts paid by FinanceCo to Organizations C fund the cost of these rewards.

CRA rules that Organizations C's supplies to members using their credits are made for consideration equal to the purchase price charged for the supplied items before deduction of the amount of the applied credits; i.e., the credits are part of the consideration for the supply to the members.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Service loyalty card promotion 175

15 August 2006 Ruling Case No. 56497 [bonus property with more than nominal value]

bonus property with more than nominal value

A charity which sold goods thoroughout the year in a gift shop also engaged in a special fund-raising campaign in which those who made donations over a specified amount received a T-shirt which had been purchased by the charity and was not available for sale in its shop. As the T-shirts had a value of over 10% of the contributions, it issued charitable receipts for only the amount of the contributions minus such T-shirt value (see ITTN, No. 26). In finding that the supplies of T-shirts by the charity to the donors were not exempt, with HST or GST applying on the value of $X for each supply of a T-shirt, CRA stated:

...where the charity provides the person making the contribution with property or a service of more than nominal value that served as an inducement to make the contribution, then for ETA purposes, the amount of the contribution is not regarded as a gift but as consideration for the supply of the property or service given in return by the charity.

23 December 2002 Technical Interpretation RITS 38588

tenant property taxes part of consideration

"Where a separate amount is paid by a lessee on account of property taxes, this amount is part of the consideration for the rental of the property, even if the lessee pays the amount directly to the municipality ... While the Tenant may be responsible under the agreement to pay property taxes to the municipality, the ultimate liability to pay the property taxes rests with the Landlord."

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 165 - Subsection 165(1) 66
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Consideration municipal taxes paid by tenant are additional rent 66

27 February 2001 Interpretation 33200

calculation of lese consideration where lease assigned

A car lease agreement is assigned to another lessee of the lessor ("Leaseco") pursuant to an Assignment and Assumption Agreement. Will "the benefit of calculating GST on the portion of the lease payment less the lien portion continue, or will GST need to be calculated on the entire amount?" CRA responded:

An assignment of a lease does not normally affect the obligations placed upon either party within the framework of the original lease agreement. Where the transfer is an assignment, the assignee assumes the primary liability to perform the obligations of the lessee under the original lease. Therefore the manner in which GST is calculated will continue to be the same as prior to the assignment of the lease. However, if the transfer of the lease creates a novation (i.e., the legal effect is that a new contract is substituted for the existing lease), we will consider the transfer to be a new supply and therefore GST will be calculated on the entire amount.

2 January 1996 Ruling Case No. 11950

Ruling that where land was donated to the local County, the value of the consideration was equal to the value of the right granted by the County to avoid a legal liability to clean up the land.

RC4082 "GST/HST Information for Charities", p. 17 (under "Donations and Gifts")

GST/HST does not apply to donations and gifts. A donation or a gift is a voluntary transfer of money or property for which the donor does not receive any benefit in return. If the donor receives property having nominal value, such as a key ring, a pin, or an envelope seal, in exchange for the donation, the donation will still not be subject to the GST/HST. However, if the donor receives property or service having more than nominal value in exchange for the donation, the payment will be subject to GST/HST, unless the property or service is an exempt or zero‑rated supply.

GST M 300-7 "Value of Supply" under "Monetary and Non-monetary Consideration"

Where the consideration for a supply consists of money and a trade-in, the consideration for the supply will be the total of the fair market value of the trade-in plus the monetary consideration. A barter transaction will be considered to occur at fair market value unless s. 153(3) applies.

GST M 300-7 "Value of Supply" under "Nil Consideration"

Where there is no consideration for an arm's length supply, the customer who receives the goods or services for free pays no GST.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 169 - Subsection 169(1) 32


Hynes, "VAT and Leases: Surrenders, Re-Grants and Rent-Free Periods", British Tax Review, 1993, No. 6, p. 479.

Subsection 153(2) - Combined Consideration


Ladas v. Canada, 2002 FCA 237

50-50 allocation of consideration for two supplies made to arm’s length customers

It was accepted that the appellant, who operated a “brew-your-own” beer and wine business, was providing separate supplies: the zero-rated sale of ingredients for making the beer or wine: and a taxable supply of its facilities and services to assist its customers in brewing the beer or wine. The Tax Court upheld the Minister’s allocation under s. 153(2) between the two supplies on a 50-50 basis. In affirming this decision, Evans JA stated (at para. 2):

[S]ubsection 153(2), provides that the consideration for multiple supplies must be allocated reasonably among the supplies. There was evidence before the Judge that justified his finding that the 50-50 allocation made in this case between the zero-rated goods sold by Mr Ladas to his customers (juices, barley and hops) and the services that he rendered (including storage, racking, the use and cleaning of equipment, monitoring the fermentation and adding additives to the juices) was reasonable, a finding that he based partly on the credibility of Mr. Ladas' testimony.

See Also

Aerovition Digital Inc. An Aerovition Corp. v. The Queen, 2022 CCI 6, 2022 TCC 27 (Informal Procedure)

s. 153(2) requires a reasonable allocation of consideration between component supplies

In order to promote the sale of its honey products produced on its rural lands, the appellant developed a “labyrinth” of trails on its forest lands. The many visitors were required to purchase honey or another farm product to gain access to the trails, which was accomplished through the sale of tickets. The first ticket, sold for $12 per adult ($10 per child), was marked as a coupon with a $1.50 value, which could be applied to purchase 50 g of honey or maple syrup, a bag of 8 candies, a maple lollipop or a 1 lb. bag of buckwheat flour. By comparison, a 500‑g. jar of churned liquid honey, for example, was assessed at $6 (four tickets) and a 1‑kg. jar, at $9 (6 tickets). Additional tickets generally cost $1.50 each.

In 9056-2059 Québec, the Federal Court of Appeal had rejected the CRA position that s. 138 applied to deem all the supplies by the appellant to be taxable supplies of access to a place of amusement (rather than zero-rated supplies of food), in light inter alia of beekeeping accounting for 50% of the appellant’s maintenance costs, and remitted the matter for redetermination by the Minister on that basis.

Before confirming the resulting reassessments that treated the $1.50 of the ticket prices as being zero-rated consideration for the honey or other food products, and the balance as consideration that was subject to tax, Boyle J referred to s. 153(2), and stated (at paras. 8. 19, TaxInterpretations translation):

The cost of admission to … the … forest must be reasonably divided between access to the labyrinth and other activities, and the mandatory purchase of a coupon to be exchanged for a honey or maple food product. The appellant called the coupon received at the entrance the coupon for the purchase of basic products. …

Appellant was unable to present any valid reason why the value of the initial coupon should be other than $1.50, which is what it charged for the same coupons when purchased individually. Appellant also could not explain how or why a coupon could have a different value if it came with an adult or child entry.

The Appellant also had not adequately established that the non-coupon portion of the ticket revenue was collected by it on behalf of a related entity.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Consideration s. 153(2) required a reasonable allocation of consideration between the two distinct supplies made 289

River Road Co-Op Ltd. v. The Queen, [1995] GSTC 34 (TCC)

Lamarre TCJ. concluded that s. 153(2) did not have the effect of deeming a separate service fee charged by a co-operative retail outlet to its members to be consideration paid by them for zero-rated groceries. Instead, the provision "was designed as an anti-avoidance rule that applies where there has been an unreasonable apportionment of consideration as between two or more supplies" (p. 34-6).

Administrative Policy

5 May 2009 Ruling 108014

allocation under s. 153(2) between residential and commercial portion of rent

A registrant has constructed and is renting condominium units in a mixed-use building, where the units in question are zoned for "live-work" use by live-in artists. CRA stated:

[W]here a supply of real property includes a residential complex and other real property that is not part of the residential complex, subsection 136(2) will apply to deem the supply of the residential complex and that other part of the real property to be separate supplies and neither supply is incidental to the other. Such is the case for XXXXX's supplies of each Unit under the Tenancy Agreement.

The supply of that portion of each Unit that is a residential complex is an exempt supply under section 6 of Part I of Schedule V to the ETA, while the supply of the remainder of each Unit is a taxable supply. Therefore, an apportionment of the rent must be made between these supplies on a reasonable basis in accordance with subsection 153(2).

CRA Audit Manual §27.6.4

S. 153(2) is anti-avoidance provision

Combined Consideration

Subsection 153(2) is an anti-avoidance rule that applies where there has been an unreasonable apportionment of the consideration for two or more supplies or for supplies and other matters. This subsection requires a reasonable attribution of the total amount of consideration between the separate billings and charges.

GST/HST Memorandum 13-4, Rebates for Printed Books, Audio Recordings of Printed Books, and Printed Versions of Religious Scriptures July 2002

Application of s. 153(2) where one supply is not incidental to the other

Combined supplies

70. In some cases, an item that consists of a book and another product packaged together and sold for a single price will be considered to be a single supply of a new product that does not fall within the definition of a printed book.

Incidental supplies
s 138
ss 153(2)

71. In other cases, a printed book and another item packaged together and sold for a single price will be considered to be two separate items. In these cases, it is necessary to determine if the supply of one item is incidental to the supply of the other. If the supply of the other item is incidental to the supply of the printed book, then the entire product will be considered to be one supply of a printed book. Conversely, if the printed book supply is incidental to the supply of the other item, then no part of the supply will be considered to be that of a printed book. For example, when software is sold with a manual, the principal item sold is the software and the manual is incidental to the software. However, if neither supply is considered to be incidental to the other, then it will be necessary to allocate the consideration between the part attributable to the book and the part attributable to the other item. Only the part attributable to the printed book would be eligible for the rebates applicable to printed books.

72. Where items are packaged together but sold for separate prices, they are treated as separate supplies.

CBAO National Commodity Tax, Customs and Trade Section – 2000 GST Questions for Revenue Canada, Q.6

Do a vendor and purchaser have to allocate between land and land goodwill and pay GST in respect of the land goodwill to the vendor? CCRA responded:

[W]here the consideration paid for the supply real property is significantly understated in comparison to the fair market value of the real property as an asset of a business and where it is reasonable to conclude that the consideration paid for the goodwill is overstated by a similar or greater amount, subsection 153(2) may apply to, in effect, reallocate the consideration between these assets. In this case, where the conditions of subsection 153(2) are met, the consideration for the real property and the goodwill will be deemed to be an amount which is reasonably attributable to each of the supplies.

GST Memorandum 300-7 "Value of Supply" under "Non-Arm's Length Supplies"

Applies where single consideration shown/relative FMV may be used

Combined Consideration

12. Pursuant to subsection 153(2), where consideration is paid for a supply and other consideration is paid for one or more other supplies or matters (either in the form of a single amount on an invoice or separate amounts on an invoice), and the consideration for one of the supplies or matters exceeds the consideration that would be reasonable if the other supply or matter were not provided, the following rule applies:

the consideration for each of the supplies and matters is deemed to be that part of the total of all amounts, each of which is consideration for one of those supplies or matters, that may reasonably be attributed to each of those supplies and matters.

13. The attribution may be based on a ratio established by the fair market value of the supplies and matters.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 155 184

Subsection 153(3) - Barters Between Registrants

Administrative Policy

5 February 2013 Ruling Case No. 141852

Company A (a Canadian-resident registrant) sells crude oil for its market value to Company B (its U.S.-resident affiliate and also a registrant), with title and delivery occurring when it is injected into the pipeline, and with Company B being the importer of record into the U.S. Where Company B does not require the crude oil which it purchased, it will sell the crude back to Company A at the current market price, with payment generally made on a set-off basis.

In finding that s. 232(2) did not apply to the supply of crude made by Company A to Company B, CRA stated:

The reduction in consideration must relate to the original supply and may be made for any reason but must not depend on any action undertaken by the recipient or any supply made by the recipient. Furthermore, a reduction in consideration is not considered to have occurred if the goods are sold back to the original supplier. To be considered a reduction of consideration, it must be evident that the goods are being returned to the supplier rather than being sold to the supplier.

Subsection 153(4) - Used Tangible Personal Property Trade-Ins


Dimension J.M.M. Inc. v. Canada, 2005 FCA 168

not available where only a credit note issued

A partnership of which the appellant was a member permitted customers to return a video game purchased from the business and receive a credit equal to the purchase price, which could only be used toward the purchase of another item sold by the business. In finding that the partnership was not able to access the s. 153(4) rule, Létourneau JA JA stated (at para. 3) that

when the client returned the property that he had purchased, he was simply given a credit note for the future purchase of some unidentified property, while the statute stipulates that the supplier must, at the time of the trade-in by the client, supply designated or identified tangible personal property that the client purchases or has undertaken to purchase, even if its delivery must be deferred.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 299 - Subsection 299(2) assessment of partnership before assessment of partner not required 179
Tax Topics - Excise Tax Act - Section 272 - Subsection 272.1(5) direct assessment of partner was valid 216

Administrative Policy

Taxable Supplies - Special Cases [CRA website]


If you accept used goods in trade for full or partial payment for goods you sell or lease in the course of your business, special rules apply, depending on whether or not the person from whom you are accepting the trade-in has to charge tax on the trade-in.

When the vendor has to charge tax

If the person from whom you accept used goods in trade has to charge GST/HST (for example, if the trade-in is an asset of a registrant's business), two separate transactions occur:

  • you purchase the trade-in from your customer; and
  • you make a sale or a lease to the same customer.

You have to pay GST/HST on the value of the trade-in, and you have to collect GST/HST on the full price charged for the goods you sell or lease. …

When the vendor does not have to charge tax

A different rule applies for used goods you accept as a trade-in from a person who is not required to charge GST/HST (usually a person who is not required to register for GST/HST). A person may also trade-in a leasehold interest in used goods.

In this case, you generally charge GST/HST on the net amount of the sale or lease, that is, the price of the goods you sell or lease minus the amount you allow for the trade-in. … [S]ee GST/HST Technical Information Bulletin B-084, Treatment of Used Goods.

TIB-084, 29 July 1997 "Treatment of Used Goods".


Steven K. D'Arcy, "Commercial Practices and the GST", Canadian GST Monitor, No. 107, 26 August 1997, p. 1: Discussion of trade-in allowance issues including treatment of liens.

Subsection 153(6) - Exchange of Natural Gas Liquids for Make-Up Gas

Administrative Policy

GST/HST Memorandum 4.5.2 (4-5-2) "Exports – Tangible Personal Property" August 2014

58. When natural gas liquids are recovered from natural gas at a straddle plant, a certain amount of make-up gas is often added to the residue gas to make up for the loss of energy content due to the recovery. This sometimes involves transactions whereby the person holding the rights to the natural gas liquids exchanges the liquids or the rights to them for the make-up gas supplied by the other party to the transaction. …

59. The exchange of natural gas liquids and make-up gas is normally between the owner of the gas and the straddle plant operator, but there may be intermediary transactions as well involving such an exchange. A third party might acquire the rights to the natural gas liquids from the owner of the gas before it is processed and promise to supply the necessary make-up gas after the processing. In this case, there could be more than one exchange to which subsection 153(6) applies: an exchange between the owner of the gas and the third party; and another exchange between the third party and the straddle plant operator who supplies the make-up gas to the third party for supply to the owner.

60. The value of the consideration or part for any supply of the natural gas liquids (or the right to recover the liquids) recovered at a straddle plant is deemed to be nil if the consideration or a part of the consideration is make-up gas... [or]if the consideration is the natural gas liquids recovered at a straddle plant or the right to recover the liquids. If there is any monetary consideration for either supply, tax is calculated in the normal manner.