Meaning of the Phrase a Particular Class or Kind as Found in subsection 153(3) of the Act
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P-221 Meaning of the phrase "a particular class or kind" as found in subsection 153(3) of the Act
Please note that the following Policy Statement, although correct at the time of issue, may not have been updated to reflect any subsequent legislative changes.
GST/HST Policy Statement P-221
DATE OF ISSUE
November 10, 1998
SUBJECT
Meaning of the phrase "a particular class or kind" as found in subsection 153(3) of the Act.
LEGISLATIVE REFERENCE(S)
Subsection 153(3) of the Excise Tax Act ("the Act")
NATIONAL CODING SYSTEM FILE NUMBER(S)
11755-2
EFFECTIVE DATE
January 1, 1991
TEXT
Issue and Decision:
This policy provides the department's interpretation with respect to the meaning of the phrase "a particular class or kind" found in subsection 153(3) of the Act.
Normally, an exchange of property between two persons in a barter transaction will constitute a supply of property made by each of the persons. The value of the consideration for the supply made by one person is the fair market value of property received from the other person. Tax may be exigible.
Special relief is found in subsection 153(3) of the Act. Under this subsection, where:
a) the consideration or a part of the consideration for a supply of property of a particular class or kind is property of that class or kind,
b) both the supplier and the recipient are registrants, and
c) the property is acquired by the recipient and the consideration or that part thereof is acquired by the supplier as inventory for use exclusively in commercial activities of the recipient or supplier, as the case may be,
the value of the consideration or that part thereof shall be deemed to be nil.
The Act does not define the phrase "a particular class or kind" for purposes of this subsection.
Therefore, the Department will consider two properties to be properties of a particular class or kind if they meet all of the following criteria:
- they are similar in their constituent materials and general appearance;
- they have the same primary end-use;
- they have been subject to a similar level of processing or refining
- where applicable, and
- they are capable of performing the same primary functions
To determine whether properties are of a particular class or kind, it is necessary to compare the inherent qualities or elements which give the properties their identities. Such a determination is a question of fact which must be decided on the basis of the relevant details in each situation. In general, subsection 153(3) of the Act will apply only to the exchange of similar properties between two registrants where neither party will result in acquiring a new property that is significantly different in all material respects from the one given up.
SAMPLE RULINGS
Sample Ruling 1
Statement of Facts
1. XYZ Co. is a pulp and paper manufacturer with a woodland operation in the Province of British Columbia.
2. ABC Co. operates a sawmill in the Province of British Columbia.
3. Both XYZ Co. and ABC Co. are GST/HST registrants.
4. XYZ Co. supplies logs to ABC Co. in exchange for wood chips. XYZ Co. acquires the wood chips as inventory for use exclusively in the manufacture of paper products for sale. ABC Company acquires the logs as inventory for use exclusively in the production of lumber for sale.
Ruling Requested
The wood chips and the logs qualify as properties of a particular class or kind, so that the value of consideration for the supply made by both XYZ Co. and ABC Co. in the barter transaction will be nil under subsection 153(3) of the Act.
Ruling Given
Based on the facts set out above, we rule that the wood chips and the logs do not qualify as properties of a particular class or kind for purposes of subsection 153(3). Hence, this subsection will not apply to the exchange of the properties between XYZ Co. and ABC Co.
Rationale
Subsection 153(3) of the Act does not apply to the exchange of logs for wood chips between |
XYZ CO. and ABC Co. because they are not properties of the same class or kind. Although both the logs and the wood chips are made up of wood fibre, they are basically different in other material respects. In particular, they do not have the same end-use, logs and wood chips are usually used for different purposes.
Sample Ruling 2
Statement of Facts
1. Co. A is a domestic auto dealer located in Montreal, carrying on the business of selling new/used domestic made automobiles.
2. Co. B is an import auto dealer located in Montreal, carrying on the business of selling new/used foreign made automobiles.
3. Both Co.A and Co.B are GST/HST registrants.
4. For business reasons, Co. A enters into an agreement with Co. B to trade a brand new 98 Canadian made automobile model AAA with a market value of $21,000 with Co. B for a brand new 98 foreign made automobile model XXX of similar market value, but with different options.
5. Both Co. A and Co. B are acquiring the automobiles as inventory for use in their business operations.
Ruling Requested
Both automobiles model AAA and model XXX qualify as properties of "a particular class or kind" so that the value of consideration for the supply by each of Co. A and Co. B of the automobiles in the barter transaction will be deemed to be nil by virtue of subsection 153(3) of the Act.
Ruling Given
Based on the facts set out above, we rule that model AAA and model XXX qualify as properties of a particular class or kind for purposes of subsection 153(3) application. These two automobiles have the same general end-use, and are capable of performing similar major functions. Hence, the value of consideration for the supply by each of Co. A and Co. B of the automobile in the barter transaction will be deemed to be nil by virtue of subsection 153(3) of the Act..
Rationale
The two automobiles qualify as properties of the same class or kind since they are made up of the same constituent materials, with the same general end-use and are capable of performing the similar primary functions.
Sample Ruling 3
Statement of Facts
1. Co. X owns and operates a gas station which sells gasoline of various octane levels.
2. Co. Y also owns and operates a gas station which sells gasoline of various octane levels.
3. For business reasons, Co. X enters into an agreement with Co. Y to trade nine thousand litres of high octane premium gas in exchange for ten thousand litres of low octane regular gas with Co. Y. Both the premium gas and the regular gas will have the same market value. There is no payment of money by either party in the transaction.
Ruling Requested
Both the premium gas and the regular gas qualify as properties of "a particular class or kind" so that the value consideration for the supply by each of Co. X and Co. Y in the barter transaction will be deemed to be nil by virtue of subsection 153(3) of the Act.
Ruling Given
Based on the facts set out above, we rule that the premium gas and the regular gas will qualify as properties of a particular class or kind for purposes of subsection 153(3). Hence, this subsection will apply to the exchange of the properties between Co. X and Co. Y.
Rationale
The premium gas and the regular gas qualify as properties of the same class or kind since they are both made up of similar chemical constituents, have the same primary end-use and have been subject to similar level of chemical processing.
Decision Tree for Policy Statement on Barter Transactions under Subsection 153(3) of the Excise Tax Act
- Date modified:
- 2002-08-01