Excise and GST/HST News - No. 104

Carbon emission allowances

On June 27, 2018, the Department of Finance announced proposed changes relating to the manner in which GST/HST is to be paid and reported in respect of taxable supplies of carbon emission allowances made in Canada, such as those traded in cap-and-trade systems. 

Generally, effective June 27, 2018, it is proposed that the purchaser of carbon emission allowances would be responsible for self-assessing the tax in respect of the purchase. This would replace the previous requirement whereby the seller of the allowances collected the tax from the purchaser and remitted it to the Canada Revenue Agency (CRA). This brings the Canadian rules in line with how these allowances are treated internationally. The proposed changes do not affect the fact that GST/HST is payable in respect of the allowances, nor the applicable rate of tax. 

The proposed new definition of emission allowance means an allowance, credit or similar instrument that:

  • is issued or created by, or on behalf of,
    • a government, a government of a foreign country, a government of a political subdivision of a country, a supranational organization or an international organization (each of which is referred to in this definition to as a “regulator”),
    • a board, commission or other body established by a regulator, or
    • an agency of a regulator;
  • can be used to satisfy a requirement under a scheme or arrangement implemented by, or on behalf of, a regulator to regulate greenhouse gas emissions, or under a prescribed scheme or arrangement; and
  • represents a specific quantity of greenhouse gas emissions expressed as carbon dioxide equivalent (e.g., one metric ton of carbon dioxide equivalent).

An allowance, credit or similar instrument that does not represent a specific quantity of greenhouse gas emissions would not satisfy the third criterion even if it otherwise meets the requirements of a scheme that seeks to regulate greenhouse gas emissions. For example, an instrument that is required to undertake certain manufacturing activities that generate greenhouse gas emissions but that does not represent a specific quantity of emissions would not meet this third criterion. The definition also includes property that is prescribed by regulations. Currently, no property is proposed to be prescribed.

The proposed changes do not affect the requirement to self-assess GST/HST in respect of imported taxable supplies of emission allowances made outside Canada.

The GST/HST changes are proposed to become effective June 27, 2018. They are also proposed to apply in respect of any supply of an emission allowance made before June 27, 2018, if any amount of GST/HST that is payable in respect of the supply and that the supplier would, in the absence of these measures, otherwise be required to collect was not collected by the supplier before June 27, 2018.

If you are a GST/HST registrant purchaser of taxable emission allowances and will use or supply the emission allowances primarily (that is, more than 50%) in your commercial activities, you would generally be required to report the related tax payable on line 205 of your regular GST/HST return for the reporting period in which the tax became payable and remit any positive amount of tax owing to the CRA by the due date of that return. If you are a GST/HST registrant purchaser of taxable emission allowances and will use or supply the emission allowances less than primarily in your commercial activities or you are not a GST/HST registrant, you would be required to report the tax payable on Form GST60, GST/HST Return for Acquisition of Real Property. You would generally be required to file this return with the CRA by the end of the month following the calendar month in which the tax became payable and to pay the tax to the CRA by that date.

It should be noted that as a transitional measure, to ensure that tax that became payable before June 27, 2018, and was not collected before that day is only required to be accounted for by the purchaser after that day, the timing of the required accounting of such tax is different than under the normal rules. In particular, the tax is required to be accounted for in the recipient's return for the reporting period that includes June 27, 2018, as opposed to the reporting period in which the tax became payable.

The regular GST/HST return and Form GST60 are being revised to reflect these proposed changes.

GST/HST registrants that are entitled to an input tax credit (ITC) in respect of the tax payable on the purchase of taxable emission allowances will continue to claim the ITC in their regular GST/HST return.

It is also proposed that a rebate of an amount paid on or after June 27, 2018, as GST/HST in error by a purchaser to a supplier in respect of a taxable supply of an emission allowance would generally no longer be available to the purchaser. A supplier of an emission allowance who charges or collects an amount as GST/HST in error would continue to be able to adjust the amount charged, or to refund or credit the amount collected to the purchaser in accordance with existing rules. A rebate of an amount paid as GST/HST in error directly to the CRA in respect of an emission allowance would continue to be available to the purchaser of the emission allowance. Additional information on procedures for rebates and refunds of amounts paid as tax in error can be found in GST/HST Memorandum 12-2 Refund, Adjustment, or Credit of the GST/HST under Section 232 of the Excise Tax Act and Guide RC4033, General Application for GST/HST Rebates.

Bill C-74, Budget Implementation Act 2018, No.1

On June 21, 2018, Bill C-74, An Act to implement certain provisions of the budget tabled in Parliament on February 27, 2018 and other measures, received royal assent.  

The Budget Implementation Act, 2018, No. 1 (Statutes of Canada: 2018, c. 12), implements a number of measures announced on February 27, 2018 in Budget 2018, and includes amendments to the Excise Tax Act and the Excise Act, 2001.

Measures included in Bill C-74 amend the Excise Tax Act, and the Excise Act, 2001 in the following ways:

Proposed Excise Tax Act GST/HST measures

Cannabis products

Bill C-74 has amended the GST/HST relieving rules in respect of basic groceries and agricultural products (for example, seeds and seedlings) to ensure that cannabis products are not zero-rated as basic groceries or agricultural products.

Proposed Excise Act, 2001 measures

Cannabis excise duty

Bill C-74 provides for a new federal excise duty on most legally available cannabis products, effective when non-medical cannabis becomes legally available for retail sale. The cannabis excise duty will generally not apply to packaged cannabis products that contain 0.3% or less tetrahydrocannabinol (THC) or to Health Canada approved pharmaceutical products with a Drug Identification Number (DIN) that are derived from cannabis and that can only be acquired through a prescription.

Cannabis producers (cultivators, producers and packagers) will be required to obtain a cannabis licence from the Canada Revenue Agency (CRA) and remit any excise duty payable. The excise duty amount will be the higher of a flat rate based on the quantity and type of cannabis material in the final product and a percentage of the dutiable amount (generally the sale price of the product without the excise duty amount) when the product is delivered by the final producer. Although the flat rate will be imposed when the product is packaged in a container for final retail sale and the percentage rate will be imposed when that producer delivers the packaged product to a purchaser (such as, a provincially-authorized distributor), only the higher of the two amounts will be payable by the producer at the time of delivery.

Cannabis taxation framework

Under a coordinated cannabis taxation framework agreement reached between the federal government and most provinces and territories (participating P/Ts), there will be both a federal excise duty rate and an additional rate that will apply in participating P/Ts.

Under Bill C-74, a participating P/T may ask that its additional duty rate be adjusted to reflect differences between its sales tax rate and the highest general sales tax rate or provincial component of the HST.

The additional duty tax rates and method of calculation will be set out by regulation that has yet to be announced.

Cannabis excise stamps

Under Bill C-74, all cannabis products subject to excise duty will be required to have a cannabis excise stamp before they can be removed from a cannabis licensee’s premises for retail sale in Canada. As cannabis excise stamps will have specific colours for each provincial and territorial market, it will be the responsibility of the cannabis licensee who packages the product to apply the appropriate cannabis excise stamp.

Transitional

The CRA will accept applications for cannabis licences and issue cannabis excise stamps in advance of the non-medical cannabis legalization date. Note that cannabis excise duty will apply to all cannabis products delivered before that date (that is, inventory for eventual retail sale), except for medical cannabis delivered before that date to final consumers through the mail. The appropriate cannabis duty rate will apply to all cannabis delivered by mail beginning on that legalization date.

Tobacco excise duty

Effective after February 27, 2018, Bill C-74 has increased the excise duty rates on tobacco products. These rates took effect February 28, 2018. Additional information and the rates are published in Excise Duty Notice EDN49, Changes to Excise Duty Rates on Tobacco Products.

Previously, excise duty rates for tobacco products were set to automatically adjust for inflation every five years, with the next adjustment scheduled for December 1, 2019. Under Bill C-74 these inflationary adjustments will be made annually on April 1 of each year, with the next adjustment occurring on April 1, 2019.

The rate increase applies to:

  • excise duty rates on stamped tobacco products such as cigarettes, tobacco sticks, manufactured tobacco other than cigarettes and tobacco sticks and cigars;
  • special duty on unstamped imported manufactured tobacco such as cigarettes, tobacco sticks and manufactured tobacco other than cigarettes and tobacco sticks delivered to a duty free shop;
  • special duty on traveller’s tobacco such as cigarettes, tobacco sticks and manufactured tobacco other than cigarettes and tobacco sticks; and
  • special duty on unstamped tobacco products such as cigarettes, tobacco sticks and tobacco products other than cigarettes and tobacco sticks manufactured in Canada and exported.

Inventory tax on cigarettes

Bill C-74 includes amendments to the Excise Act, 2001 to impose a tax on duty-paid and special duty-paid cigarettes held in inventory at 12:01 a.m. on February 28, 2018. Therefore, most persons who owned duty-paid or special duty-paid cigarettes at the beginning of February 28, 2018 were subject to the cigarette inventory tax.

For existing inventories held by manufacturers, importers, wholesalers and retailers at the end of February 27, 2018, Bill C-74 imposed proposed an inventory tax of $0.011468 per cigarette, which was required to be remitted by April 30, 2018.

All persons liable to pay the inventory tax were required to complete and file Form B273, Excise Return – Cigarette Inventory Tax, on or before April 30, 2018. Inventory was required to be determined in a fair and reasonable manner as supported by appropriate books and records.

This does not apply to small retail inventories (that is, 30,000 or less cigarettes at separate retail establishments) or to cigarettes held in vending machines.

More information

For more detailed information on the above proposed measures see these Excise Duty Notices:

Go to Canada.ca/cannabis-excise for comprehensive information about the excise duty framework for cannabis.

GST/HST and investment limited partnerships

As announced on February 27, 2018 in Budget 2018, (not included in Bill C-74) the Government confirmed its intent to proceed with proposals related to investment limited partnerships (ILPs) that were announced on September 8, 2017.

The proposed amendments announced in September 2017 included new paragraph 149(5)(f.1) which would add an ILP to the definition of “investment plan” in subsection 149(5) of the Excise Tax Act (the Act) which would apply to any taxation year of an ILP that begins after 2018. Budget 2018 confirmed the proposed amendment to add new paragraph 149(5)(f.1) and that this proposed amendment would apply to any taxation year of an ILP that begins after 2018. Budget 2018 also proposed that an ILP could elect to have new paragraph 149(5)(f.1) apply to its taxation years that begin in 2018.

In order to make an election to have proposed paragraph 149(5)(f.1) apply to the taxation year of an ILP that begins in 2018, the ILP would send a letter to the following address:

Canada Revenue Agency
Prince Edward Island Tax Centre
Business Number Services
275 Pope Road
Summerside, PE C1N 6A2

The letter must indicate in the subject line “Investment limited partnership election” and include the following information:

  • the name and contact information (telephone number and mailing address) of the ILP;
  • the business number and the GST/HST program account, if applicable;
  • the taxation year(s) of the ILP that begins in 2018;
  • a statement that the ILP elects to have proposed paragraph 149(5)(f.1) apply to its taxation year(s) that begins in 2018;
  • the first day of the taxation year with respect to which the election is being made;
  • an indication of whether the ILP making the election would be an SLFI for GST/HST or QST purposes or both as a result of making the ILP election; and
  • the signature of an authorized person of the ILP.

In addition, an equivalent election is proposed for QST purposes. It is proposed that an ILP that makes the election for GST/HST purposes on or before May 28, 2018, be deemed to have made the same election for QST purposes. It is also proposed that an ILP that makes the election for GST/HST purposes after May 28, 2018, must make the election for QST purposes. An ILP would not be able to make the election for QST purposes if it did not make the election for GST/HST purposes. If the ILP would be an SLFI for GST/HST or QST purposes or both as a result of making the elections for GST/HST and QST purposes after May 28, 2018, the ILP would indicate in the letter that is sent to the Prince Edward Island Tax Centre that it is also making the election for QST purposes.

It is the CRA’s position that, where a general partner of a limited partnership (including an ILP) provides a management or administrative service to the limited partnership, the general partner may be providing this service to the limited partnership otherwise than in the course of the limited partnership’s activities. As such, existing subsection 272.1(3) may have application unless the proposed new rules applicable to ILPs apply.

The proposed amendments announced in September 2017 added proposed subsection 272.1(8) to clarify that subsection 272.1(3) rather than subsection 272.1(1) would apply to management or administrative services rendered by a general partner of an ILP to the ILP. Based on proposed subsection 272.1(8), the rendering of a management or administrative service would be deemed not to be done by the general partner as a member of the ILP and the supply that includes this service would be deemed to have been made otherwise than in the course of the ILP’s activities. Budget 2018 confirmed the intention to proceed with the proposed amendments and announced proposed amendments to subsection 272.1(3).

A GST/HST Notice explaining the election and the new rules will be available on the Canada.ca website.

Consultation on the GST/HST holding corporation rules

Budget 2018 announced that the Government will consult shortly on certain aspects of the GST/HST holding corporation rules. Currently, a parent corporation resident in Canada can generally claim input tax credits (ITCs) to recover GST/HST paid on expenses related to shares or indebtedness of a related corporation where 90% or more of the property of the related corporation is for consumption, use or supply in commercial activities. Commercial activities do not include the making of exempt supplies.

Consultations will cover the current limitation of this rule to corporations and the required degree of relationship between the parent corporation and the other corporation. In addition to these consultations, the Government intends to clarify which expenses of the parent corporation qualify for ITCs under the rule.

Consultation documents and draft legislative proposals regarding these issues will be released for public comment in the near future.

Alcohol excise duty rate increase – April 1, 2018

The rates of excise duty imposed on beer (Excise Act) and on spirits and wine (Excise Act, 2001) are adjusted annually every April 1 based on changes to the Consumer Price Index (CPI).

For information on the adjusted rates of excise duty, please refer to Excise Duty Notices EDBN24 Excise Duty Rates on Beer Effective April 1, 2018 and EDN46 Excise Duty Rates on Spirits and Wine Effective April 1, 2018. These rates apply to the excise duty that become payable on beer, spirits and wine on or after April 1, 2018.

For a listing of all current and historical excise duty rates, please refer to Excise Duty Rates.

Supplies of dried marihuana and other cannabis products for medical purposes

This article provides an update on the CRA’s position concerning the application of the GST/HST to supplies of dried marihuana and other cannabis products for medical purposes in light of the introduction of the Access to Cannabis for Medical Purposes Regulations (ACMPR). This article does not refer to the changes to the legal status of cannabis.

Generally, supplies of property and services made in Canada are subject to the GST/HST unless they are specifically relieved under the Excise Tax Act (the Act). Part I of Schedule VI to the Act contains provisions that zero-rate a broad range of drugs and substances regulated under federal legislation. The tax rate in respect of a zero-rated supply is 0%. If a drug is not included in Part I of Schedule VI, then the supply of the drug would be subject to the GST/HST at the applicable rate (5%, 13% or 15%), depending on the province in which the supply is made, unless another provision in the Act applies to zero-rate or exempt the supply.

Generally the supply of dried marihuana and other cannabis products for medical purposes is a taxable (other than zero-rated) supply. An explanation on the application of the GST/HST to such products is found below.

Background

Historically, the sale of dried marihuana for medical purposes was subject to the Marihuana Medical Access Regulations (MMAR) made under the Controlled Drugs and Substances Act (CDSA). These regulations were repealed and replaced by the Marihuana for Medical Purposes Regulations (MMPR). However, due to the Federal Court ruling in the case of Allard v. Canada 2016 FC 236, on August 24, 2016, the MMPR were repealed and effectively replaced by the ACMPR, which remain in effect to this date.

Under the ACMPR, individuals authorized to use cannabis for medical purposes by their health care practitioner have legal access to dried marihuana, fresh marihuana and cannabis oil when obtained from a licensed producer. In addition, these individuals are permitted to produce a limited amount of cannabis for their own medical purposes, (or designate someone to produce it for them) from marihuana seeds and plants obtained from a licensed producer.

Paragraph 2(d) of Part I of Schedule VI

Paragraph 2(d) of Part I of Schedule VI to the Act zero-rates a supply of a drug that contains a substance included in the schedule to the Narcotic Control Regulations (NCR), other than a drug or mixture of drugs that may, pursuant to the CDSA or regulations made under the CDSA, be sold to a consumer with neither a prescription nor an exemption by the Minister of Health in respect of the sale. Accordingly, a supply of a drug containing cannabis is not zero-rated under paragraph 2(d) if it may be sold to a consumer without a prescription or an exemption.

Under sections 22 and 130 of the ACMPR, dried marihuana, fresh marihuana and cannabis oil can be provided or sold in Canada by a licensed producer to a registered client only if the client has a “medical document” provided by a health care practitioner, namely a physician or nurse practitioner, pursuant to subsection 8(1) of the ACMPR.

As subsection 8(1) of the ACMPR uses the term “medical document” rather than the term “prescription”, the determination as to whether the sales of dried marihuana and other cannabis products by a licensed producer to a registered client for medical purposes are zero-rated under paragraph 2(d) of Part I of Schedule VI depends on whether a “medical document” constitutes a “prescription” within the meaning of section 1 of Part I of Schedule VI. The sales of cannabis products would not be zero-rated if it is determined that a “medical document” does not constitute a “prescription”.

Section 1 of Part I of Schedule VI defines a prescription to mean a written or verbal order, given to a pharmacist by a medical practitioner or authorized individual, directing that a stated amount of any drug or mixture of drugs specified in the order be dispensed for the individual named in the order. Under section 1 of Part I of Schedule VI, a medical practitioner is a person who is entitled under the laws of a province to practise the profession of medicine or dentistry. The CRA interprets the definition of medical practitioner to include a physician or a dentist.

It is the CRA’s view that although a “medical document” under subsection 8(1) of the ACMPR may contain information that is similar to that found on a prescription (such as a consumer’s name, medical condition and the amount of marihuana authorized for daily use), such “medical document” is not a “prescription” within the meaning of section 1 of Part I of Schedule VI to the Act, as it is not a written or verbal order given to a pharmacist. The CRA’s conclusion is based, in part, on the fact that there is no provision in the ACMPR that authorizes a pharmacist to sell or dispense dried marihuana, fresh marihuana or cannabis oil for medical purposes to an individual consumer. Consequently, the sale of cannabis products by licensed producers to registered users pursuant to the ACMPR are not zero-rated pursuant to paragraph 2(d) of Part I of Schedule VI to the Act because these drugs can be sold without a prescription.

Paragraph 2(d) of Part I of Schedule VI also zero-rates sales of certain drugs sold with an exemption under the CDSA by the Minister of Health. Section 56 of the CDSA exempts a person or class of persons or any controlled substance from the provisions in the CDSA and its regulations. However, there is no exemption granted by the Minister of Health applicable to the sale of dried marihuana and other cannabis products by a licensed producer to a registered client. The ACMPR are subordinate legislation promulgated by the Governor in Council on the recommendation of the Minister of Health and as such, do not constitute an exemption granted by the Minister of Health.

As dried marihuana, fresh marihuana and cannabis oil can be sold to a consumer without a prescription or an exemption from the Minister of Health, sales of these products are not zero-rated under paragraph 2(d) of Part I of Schedule VI.

Paragraph 3(b) of Part I of Schedule VI

Under paragraph 3(b) of Part I of Schedule VI to the Act, a drug is zero-rated if it is dispensed on the prescription of a medical practitioner or authorized individual for the personal consumption or use of the individual named in the prescription. As discussed above, the definition of prescription in section 1 of Part I of Schedule VI requires a written or verbal order be given to pharmacist to dispense the stated amount of dried marihuana or other cannabis products. As a medical document is not a prescription, and as a pharmacist cannot sell or dispense dried marihuana or other cannabis products to a registered client of a licensed producer under the ACMPR, paragraph 3(b) of Part I of Schedule VI cannot apply to zero-rate sales of dried marihuana or other cannabis products in this circumstance.

There are no other provisions in the Act to zero-rate sales of dried marihuana or other cannabis products by a licensed producer to a registered client. Therefore, the sales are subject to the GST/HST.

Marihuana plants and seeds

Certain supplies of industrial hemp products are zero-rated when supplied by a producer licensed pursuant to the Industrial Hemp Regulations (the Regulations) under the CDSA.

The supply of viable grain or seeds and mature stalks having no leaves, flowers, seeds or branches, of hemp plants of the genera Cannabis by a licensed producer to a client is zero-rated. In the case of viable seeds the supply is only zero-rated where the grain or seeds are included in the definition of industrial hemp under the Regulations and the supply is made in accordance with the CDSA.

In part, industrial hemp means the plants and plant parts of the genera Cannabis, the leaves and flowering heads of which do not contain more than 0.3% THC w/w, and includes the derivatives of such plants and plant parts. It also includes the derivatives of non-viable cannabis seed.

Marihuana seeds supplied by a licensed producer are not included in the above definition of industrial hemp if they are culled from a marihuana plant which has a THC level above 0.3% THC w/w. Sales of such marihuana seeds and marihuana plants are subject to the GST/HST.

Illegal sales of cannabis products

In accordance with the decision of the Federal Court of Appeal in Gerry Hedges v. The Queen 2016 FCA 19, the supply of cannabis products made outside of the regulatory scheme provided by the ACMPR is also subject to the GST/HST.

Cayoose Creek implements the First Nations Goods and Services Tax

The Council of Cayoose Creek has entered into an agreement with the Government of Canada to impose a value added tax under the Cayoose Creek First Nation Goods and Services Tax Law. Effective February 13, 2018, a First Nations Goods and Services Tax (FNGST) has been imposed on Cayoose Creek lands listed in Schedule 1 to the First Nations Goods and Services Tax Act.

Therefore, effective February 13, 2018, the FNGST has applied to supplies made on the reserves of Cayoose Creek. Everyone, including Indians, is required to pay the FNGST on property or services acquired on the Cayoose Creek reserves.

As the FNGST is designed to work within the GST/HST framework, no additional forms or changes to registration will be required. Vendors will simply apply the FNGST to their supplies of property and services made on the Cayoose Creek reserves in the same manner as the GST/HST. The GST, or the federal part of the HST, does not apply to sales on these lands when the FNGST applies.

Please see GST/HST Notice307, Cayoose Creek Indian Band Implements the First Nations Goods and Services Tax for further information.

Recent amendment to the public service bodies’ rebate

Certain public service bodies (PSBs) can claim a PSB rebate to recover a percentage of the GST/HST paid or payable on eligible purchases and expenses. The PSB rebate is payable under section 259 of the Excise Tax Act (the Act). Section 259 was recently amended to revise the timing requirements for PSB rebate applications to provide PSBs with improved flexibility and administrative simplicity.

New subsection 259(6.1) was included in the Budget Implementation Act, 2017, No.2, which received Royal Assent on December 14, 2017. Where certain conditions are met, new subsection 259(6.1) allows a PSB to claim a rebate in respect of property or a service for a particular claim period in a rebate application for a subsequent claim period.

If a PSB has not claimed a rebate in respect of property or a service for a particular claim period, new subsection 259(6.1) allows the rebate to be carried forward where the following four conditions are met:

  • the PSB did not claim the rebate in the application for any other claim period;
  • the application for the subsequent claim period is filed within two years after
    • if the person is a registrant, the day on or before which the person is required to file its GST/HST return for the particular claim period, and
    • if the person is not a registrant, the day that is three months after the last day of the particular claim period;
  • the PSB did not change the claimant type under which it was eligible to claim PSB rebates at any time from the beginning of the claim period in which the GST/HST was paid or payable to the end of the subsequent claim period; and
  • the applicable rebate factor(s) did not change at any time from the beginning of the claim period in which the GST/HST was paid or payable to the end of the subsequent claim period.

New subsection 259(6.1) applies to subsequent claim periods ending after September 8, 2017.

The amendment does not change the underlying requirements for claiming a PSB rebate. For instance, new subsection 259(6.1) does not affect a person’s eligibility for the PSB rebate, the PSB rebate calculation, or the deadline for filing PSB rebate applications. In addition, the definitions of claim period and non-creditable tax charged remain the same. For more information, see Guide RC4034, GST/HST Public Service Bodies' Rebate, and GST/HST Memorandum 13-5, Non-creditable Tax Charged.

Example 1

A GST/HST registrant charity has monthly reporting periods for its GST/HST returns. The charity always files its PSB rebate application for a claim period with its GST/HST return for that period before the due date of the GST/HST return. In August 2018, the charity discovers an invoice dated April 24, 2018, showing $1,500 in GST payable by the charity on an eligible service. The charity had not included the $1,500 in any of its previous PSB rebate calculations.

Can the charity include the $1,500 in its PSB rebate calculation for the claim period of August 1, 2018 to August 31, 2018?

Where all the conditions in subsection 259(6.1) are met, the charity can claim the PSB rebate in respect of the eligible service for the claim period of April 2018 in its rebate application for the claim period of August 2018.

Example 2

A non-registrant charity pays GST/HST on eligible purchases and expenses throughout its fiscal year ending December 31, 2018.

Can the charity file one PSB rebate application that covers the whole fiscal year?

As the charity is a non-registrant, it has two claim periods for each fiscal year – the first six months and the last six months of the fiscal year. Where all the conditions in subsection 259(6.1) are met, the charity can carry forward all of its PSB rebates from the first claim period in the fiscal year to the rebate application for the second claim period in the fiscal year. The dates of the claim periods would not change.

Example 3

A non-registrant charity resident in Alberta purchased a service on which GST was payable on February 15, 2017. The charity claimed a 50% PSB rebate in respect of the service in its rebate application for the claim period of January 1, 2017 to June 30, 2017. The charity later determined that it met the definition of external supplier and was entitled to an 83% PSB rebate in respect of the service.

Can the person claim the additional 33% PSB rebate in respect of the service in the rebate application for a subsequent claim period (for example, the claim period of July 1, 2018 to December 31, 2018)?

No. Subsection 259(6.1) does not apply because the person has already claimed a PSB rebate in respect of the service for the claim period of January 1, 2017 to June 30, 2017 in the rebate application for that claim period. Subsection 259(6.1) does not allow a PSB to split the PSB rebate in respect of a specific purchase or expense between the rebate applications for multiple claim periods. To claim the 83% rebate, the person must request reassessment of the rebate application for the claim period of January 1, 2017 to June 30, 2017.

Guide dogs or other service animals

A supply of an animal that is or is to be specially trained to assist an individual with a disability or impairment with a problem arising from the disability or impairment is zero-rated pursuant to section 33 of Part II of Schedule VI to the Act if the supply is made to or by an organization that is operated for the purpose of supplying such specially trained animals to individuals with the disability or impairment. The service animal may be specially trained at the time of the supply, or be specially trained in the future.

The following are considered service animals for purposes of section 33:

  • seeing-eye horses (miniature ponies);
  • seeing-eye dogs;
  • hearing-ear dogs;
  • seizure alert or response dogs;
  • special service skills dogs that can assist pulling a wheelchair, carrying or picking up items or providing balance for an individual with mobility difficulties; and
  • other special skills service animals that offer assistance to young adults with autism or provide emotional support for individuals with mental health issues.

Additionally, section 33 also zero-rates the supply of a service of training an individual to use the service animal if the service is provided by an organization that is operated for the purpose of supplying such specially trained animals to individuals with a disability or impairment. Where an organization’s purpose is to train service animals and individuals to use service animals, rather than supplying the service animal, the supply of any training services provided to an individual to use the service animal is generally taxable.

Example

An individual purchases a dog trained to provide seizure response to an individual with epilepsy when the individual has a seizure, from an organization operated for the purpose of supplying such specially trained animals to individuals with the disability or impairment. The sale of the dog is zero-rated. If the organization also teaches the individual how to use the dog, the supply of the training service is zero-rated.

Supplies by public service bodies

A supply of a service animal or of a service of training an individual to use a service animal made by a charity or non-profit organization may be exempt from GST/HST under certain conditions. For example, where a charity or non-profit organization provides all or substantially all (90% or more) of these supplies free of charge. For more information see GST/HST Guide RC4081, GST/HST Information for Non-Profit Organizations. and Guide RC4082, GST/HST Information for Charities.

The supply of a service of training a service animal is not zero-rated under section 33. If a supply of training a service animal is made by a charity or public institution, the supply would generally be exempt from GST/HST under section 1 Part V.1 of Schedule V or section 2 of Part VI of Schedule V respectively.

Application of GST/HST to increased provincial tax rates in British Columbia on sales of passenger vehicles

On March 15, 2018, the British Columbia (B.C.) Budget Measures Implementation Act, 2018 received Royal Assent. This act implements measures announced in the February 20, 2018 Budget, such as changes to its Provincial Sales Tax Act that increase the provincial sales tax rate on sales of new and used passenger vehicles with a purchase price of $125,000 or more.

Effective April 1, 2018, the provincial sales tax rate on sales of passenger vehicles with a purchase price of $125,000 to $149,999 has increased to 15%. The provincial sales tax rate on sales of passenger vehicles with a purchase price of $150,000 or more has increased to 20%. A result of these increases is that effective April 1, 2018, the provincial sales tax imposed in such circumstances forms part of the consideration for a taxable supply of a passenger vehicle and will be subject to GST/HST.

Section 154 of the Excise Tax Act (the Act) provides, in part, that taxes, duties, and fees imposed by a provincial government (referred to as provincial levies) and payable by a recipient of a supply of property or services are generally included in the value of the consideration for the supply, unless they are prescribed under the Taxes, Duties and Fees (GST/HST) Regulations (the Regulations). With respect to the provincial levies imposed under an Act set out in subsection 2(1) of the Regulations, any provincial levy which exceeds the specified tax rate for a province is not prescribed for purposes of section 154, and therefore is included in the value of the consideration for the related supply of property or services on which the GST/HST is calculated. For purposes of section 154 and the Regulations, the specified tax rate in B.C. is 12%. Although B.C.’s Provincial Sales Tax Act is set out in the Regulations and as a result, generally taxes imposed under the Provincial Sales Tax Act are prescribed and excluded from the consideration for a supply, the new proposed provincial sales tax rates of 15% and 20% on new and used passenger vehicles with a purchase price of $125,000 or more exceeds the 12% specified tax rate for B.C. set out in the Regulations.

As a result, effective April 1, 2018, for all sales of new and used passenger vehicles in B.C. with a purchase price of $125,000 or more, the GST is calculated on the total consideration paid for the passenger vehicle, including the amount of the provincial sales tax imposed on the purchase of the passenger vehicle.

Example:

On April 15, 2018, a B.C. resident purchases a new passenger automobile from a dealership in B.C. for a total purchase price of $135,000. Since the purchase price of the new passenger automobile is $125,000 or more, but not more than $149,999, the Provincial Sales Tax Act will impose a provincial sales tax rate of 15% on the purchase price of the new passenger automobile (other taxes and levies sometimes charged on the purchase of new passenger automobiles are ignored for the purposes of this example). Because the provincial sales tax rate of 15% on the purchase price of the new passenger automobile exceeds the 12% specified tax rate for B.C. (as set out in the Regulations), in accordance with section 154 of the Act, the GST payable by the purchaser of the new passenger vehicle is calculated on the consideration payable for the new passenger automobile including the B.C. provincial sales tax of 15%, as follows:  

Cost of passenger automobile:
$135,000.00
 
B.C. provincial sales tax ($135,000 x 15%):
  20,250.00
 
Total consideration for the passenger automobile:
$155,250.00
GST ($155,250 x 5%):
  7,762.50
 
Total amount charged to customer ($155,250 + $7,762.50):
$163,012.50

For more information regarding the application of GST/HST to federal, provincial and territorial taxes, duties and fees, see GST/HST Memorandum 3-5 Application of GST/HST to Other Taxes, Duties, and Fees.

New home warranties

New home warranty products are offered in various provinces to purchasers of new homes. In some provinces they are issued as policies or contracts of insurance by a person who is an insurer for GST/HST purposes while in other provinces they are issued by organizations that are not insurers. For GST/HST purposes, a person is an insurer if they are licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada an insurance business or under the laws of another jurisdiction to carry on in that other jurisdiction an insurance business.

New home warranties issued by insurers:

Where a new home warranty is issued as a policy or contract of insurance by an insurer, it is usually a taxable supply for GST/HST purposes. A new home warranty is usually excluded from the definition of an insurance policy for GST/HST purposes as a warranty in respect of the quality, fitness, or performance of tangible property (the new home) where it is supplied to a person who is acquiring that property otherwise than for resale.

Further, while the GST/HST definition of insurance policy includes a bid, performance, maintenance or payment bond issued in respect of a construction contract, a new home warranty is not one of these bonds.

As a result, if, for example, an insurer issues a new home warranty insurance policy to an individual who is buying the new home for his or her place of residence, the fee paid for the new home warranty by the home buyer would be consideration for a taxable supply.

There are certain situations where a new home warranty issued by an insurer as a policy or contract of insurance will be included in the definition of insurance policy for GST/HST purposes:

  • where it is issued to a person who is buying the new home to resell it; and
  • where it is issued to a person who is not buying a new home from a builder, but who is acquiring services of constructing a new home on land owned by the person.

In such cases, because the new home warranties are insurance policies for GST/HST purposes, the fee paid for their issuance by the person will be consideration for an exempt supply of a financial service.

New home warranties issued by non-insurers

Where a new home warranty is issued by a person other than an insurer it will, regardless of who it is issued to, not be included in the definition of insurance policy, because it is not issued by an insurer, and because it is not a bid, performance, maintenance or payment bond issued in respect of a construction contract. As such, the issuance of a new home warranty by a person other than an insurer is generally a taxable supply for GST/HST purposes.

Changes to GST34-2 return package

The CRA is continuing its efforts to simplify and improve its services for businesses and contribute to environmental sustainability. Starting in spring 2018, the CRA is changing the Form GST34-2, Goods and Services Tax/Harmonized Sales Tax (GST/HST) Return for Registrants, for monthly and quarterly paper filers to a new, streamlined filing package.

Along with these changes, how often you receive your returns will also be changing. If you currently receive a paper return each time you are required to file throughout the fiscal year, you will start receiving one package for the entire year. Your filing and payment due dates will not change.

What this means for you:

  • Electronic filers – If your business has already made the switch to electronic filing, your filing package will remain the same.
  • Quarterly paper filers – If you file your GST/HST returns quarterly, you are now receiving four individual GST34-2s in the mail throughout the year. Starting in spring 2018, you will receive one GST34-2 package containing information for all of your quarterly reporting periods.
  • Monthly paper filers – If you file your GST/HST returns monthly, you are now receiving 12 individual GST34-2s in the mail throughout the year. Starting in spring 2018, you will receive one GST34-2 package containing information for all of your monthly reporting periods.
  • Annual paper filers – If you are an annual filer, you will continue to have one GST34-2 mailed to you for your fiscal year.
  • GST/HST return – We have made some changes to the layout of the return. The new version will have one return on the bottom and another inverted at the top of the same sheet.
  • Remittance vouchers – Your GST34-2 package will include a new version of your remittance voucher for each return in your fiscal year. The new version of the remittance voucher will have one voucher on the bottom and another inverted at the top of the same sheet. You can choose to start or stop receiving remittance vouchers through My Business Account. If you have already chosen not to receive remittance vouchers, you will continue not to receive them.
  • Working copies – Working copies will not be sent with your GST34-2 package but you can download a printer-friendly version at canada.ca/gst-hst-working-copy.

Information included in the GST34-2 package

The GST34-2 package will include the following:

  • a list of your reporting periods and filing due dates for all your returns in that particular fiscal year;
  • your GST/HST returns for the entire fiscal year;
  • remittance vouchers for each return in the fiscal year (unless you currently do not receive remittance vouchers);
  • your unique online access code plus more information about CRA’s electronic services; and
  • more information about payment options and direct deposit.

If you are filing a GST66, Application for GST/HST Public Service Bodies' Rebate and GST Self-Government Refund, or a GST499-1, First Nations Tax (FNT) Schedule, you are able to get your forms at canada.ca/cra-forms. You can also file your GST66 application electronically using My Business Account or GST/HST NETFILE.

Helpful reminder

To help you keep track of your due dates, we encourage you to download the CRA Business Tax Reminders mobile app. Using the app, you can create custom reminders and alerts for key CRA due dates related to instalment payments, returns, and remittances. For more information, go to canada.ca/cra-mobile-apps.

CRA BizApp

The CRA has released a new mobile web app called CRA BizApp.

This new app was created based on feedback received during the Serving You Better consultations with small and medium businesses. To find out more about the CRA's action plan to serve small and medium businesses, go to canada.ca/cra-serving-you-better.

This mobile web app lets you check your business balances owing and safely make payments by pre-authorized debit for GST/HST, excise duty, corporation and payroll accounts.

You can access CRA BizApp from your mobile device at your convenience.

It’s a fast, easy, and secure way to view:

  • account transactions
  • your expected GST/HST returns
  • the status of your filed GST/HST and corporation income tax returns

To use the app, go to CRA BizApp to log in or register. If you are already registered for My Business Account, you can use the same login information to use CRA BizApp.

You can also use the CRA Business Tax Reminders app to create reminders for key CRA due dates for your payments and returns.

To find out more about:

Prescribed rates of interest

The prescribed annual rate of interest in effect from July 1, 2018 to September 30, 2018, on overdue amounts payable to the Minister is 6%. The prescribed annual rate of interest on amounts owed by the Minister (such as, rebates or refunds) is 2% for corporate taxpayers and 4% for non-corporate taxpayers. These rates are applicable to income tax, excise tax, the softwood lumber products export charge, GST/HST and the air travellers security charge (ATSC) and excise duty on wine, spirits and tobacco.

The prescribed annual rate of interest respecting excise duty on beer, on overdue amounts payable for the indicated period, is set at 4%. Refund interest rates are not applicable for amounts owed by the Minister (such as, rebates or refunds) for excise duty that is in relation to beer.

Prescribed rates of interest
  GST/HST, Excise Tax, Softwood Lumber Products Export Charge, Excise Duty (wine, spirits, tobacco), ATSC, Income Tax Excise Duty (beer)
Period Refund Interest Arrears and Instalment Interest Arrears
Interest
Corporate Taxpayers Non-Corporate Taxpayers
July 1 to September 30, 2018 2% 4% 6% 4%
April 1 to June 30, 2018 2% 4% 6% 4%
January 1 to March 31, 2018 1% 3% 5% 3%
October 1 to December 31, 2017 1% 3% 5% 3%

Prescribed interest rates for previous years are available on Canada.ca at Prescribed interest rates.

What’s new in publications

The following is a list of new or revised excise and GST/HST forms and publications.

GST/HST forms

GST/HST guides

GST/HST notices

Excise duty forms

Cannabis excise duty forms

Excise duty memoranda

Excise duty notices

Excise taxes and special levies rates

All GST/HST, excise duty, and excise taxes and special levies publications can be found on the Canada.ca website. Go to the Technical information – GST/HST, Excise taxes and other levies and Excise duty webpages.

To receive email notification as soon as a document is published on the Canada.ca, go to electronic mailing lists and subscribe to the RSS feed for all new CRA publications and forms, or subscribe to any number of mailing lists for different types of publications.

Contact us

More information

Forms and publications

  • All GST/HST technical publications and GST/HST related forms are available on the Canada.ca website. Go to GST/HST related forms and publications.
  • To access all other forms and publications on Canada.ca go to Forms and publications.
  • To order forms and publications by telephone, call 1-800-959-5525.

To make a GST/HST enquiry by telephone:

  • for GST/HST general enquiries, call Business Enquiries at 1-800-959-5525;
  • for GST/HST technical enquiries, call GST/HST Rulings at 1-800-959-8287.

If you are located in Quebec, call Revenu Québec at 1-800-567-4692 or visit their website at revenuquebec.ca.

If you are a selected listed financial institution (whether or not you are located in Quebec) and require information on the GST/HST or the QST, go to GST/HST and QST - Financial institutions, including selected listed financial institutions or

  • for general GST/HST or QST enquiries, call Business Enquiries at 1-800-959-5525;
  • for technical GST/HST or QST enquiries, call GST/HST Rulings SLFI at 1-855-666-5166.

Account enquiries

For general information and to make enquiries regarding your account (except for softwood lumber products export charge accounts), you can:

  • view answers to common enquiries, or submit an enquiry using the online “Enquiries service” on “My Business Account”;
  • view account information online at E-services for Businesses; or
  • call Business Enquiries at 1-800-959-5525.

For online access to your GST/HST, air travellers security charge, excise tax and duty accounts (such as viewing up-to-date account balances and transactions, transferring payments and more), go to:

For enquiries regarding the status of specific GST/HST domestic rebate claims, call Business Enquiries at 1-800-959-5525.

Help

For technical support using our online services:

  • business accounts, call 1-800-­959-­5525
  • teletypewriter users, call 1-800-665-0354
  • calls outside of Canada and the United States, call collect at 1-613-940-8497

Please have the screen number (bottom right) and, if applicable, the error number and message received on hand when calling.

The Excise and GST/HST News is published quarterly and highlights recent developments in the administration of the GST/HST, First Nations goods and services tax (FNGST) and First Nations tax (FNT), softwood lumber products export charge, air travellers security charge (ATSC) as well as excise taxes and duties. If you would like to receive a link to each new edition of the Excise and GST/HST News as it is published, subscribe to the electronic mailing list.

This publication is provided for information purposes only and does not replace the law, either enacted or proposed. Please note that any commentary in this newsletter regarding proposed measures should not be taken as a statement by the CRA that such measures will in fact be enacted into law in their current form. Comments or suggestions about the newsletter should be sent to the Editor, Excise and GST/HST News, Legislative Policy and Regulatory Affairs Branch, CRA, Ottawa, ON K1A 0L5.

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