Excise and GST/HST News - No. 101
Table of Contents
- Bill C-29 receives Royal Assent
- New rebate for printed books in Newfoundland and Labrador
- Medical practitioner on-call fees
- Supplies of intrauterine devices
- Registered national arts service organizations
- Flow-through of tax-relief as described in B-039 from one partnership to another partnership
- Designated rent-geared-to-income (RGI) housing providers – ending of government funding
- Reminder to air travellers security charge registrants, and excise duty and excise tax licensees regarding the filing of returns
- Calculate instalment payments service
- Prescribed rates of interest
- What’s new in publications
- Contact us
Bill C-29 receives Royal Assent
On December 15, 2016, Bill C-29, referred to as the Budget Implementation Act, 2016, No. 2, received Royal Assent.
The Budget Implementation Act, 2016, No. 2, (Statutes of Canada: 2016, c. 12) amends the Excise Act, 2001 and certain GST/HST measures in the Excise Tax Act as well as the Closely Related Corporations (GST/HST) Regulations and Streamlined Accounting (GST/HST) Regulations.
New rebate for printed books in Newfoundland and Labrador
As of January 1, 2017, there is no longer a point-of-sale rebate of the provincial part of the HST paid or payable on purchases of qualifying books in Newfoundland and Labrador. Information on the point-of-sale rebate for qualifying books is available in GST/HST Info Sheet GI-065, Point-of-Sale Rebate on Books.
To coincide with the elimination of this provincial point-of-sale rebate, the existing federal printed book rebate available to certain public service bodies has been expanded to include the provincial part of the HST payable on printed books and other specified property purchased in, imported, or brought into Newfoundland and Labrador.
The same conditions that apply for purposes of the existing federal printed book rebate also apply for purposes of the new rebate of the provincial part of the HST.
This rebate can be claimed by the following specified persons:
- public colleges;
- school authorities;
- charities, public institutions, or qualifying non-profit organizations that operate a public lending library; or
- prescribed charities or prescribed qualifying non-profit organizations whose primary purpose is the promotion of literacy.
The specified property that qualifies for this rebate includes most printed books, audio recordings of printed books, and printed versions of religious scriptures. The printed book rebate is generally not available if the specified property was acquired to be sold or given away. However, prescribed charities and prescribed qualifying non-profit organizations whose primary purpose is the promotion of literacy can claim a printed book rebate if the specified property was acquired to be given away for free.
Specified persons claim a federal printed book rebate on line 307 of Form GST66, Application for GST/HST Public Service Bodies' Rebate and GST Self-Government Refund. The new printed book rebate of the provincial part of the HST is claimed on line 307-NL of Form RC7066-SCH, Provincial Schedule – GST/HST Public Service Bodies' Rebate. A specified person does not need to be resident in Newfoundland and Labrador to claim this rebate.
A provincial point-of-sale rebate on purchases of printed books is still available in the participating provinces other than Newfoundland and Labrador. If a specified person is eligible for a point-of-sale rebate of the provincial part of the HST paid or payable on the purchase of a printed book, it cannot claim the new printed book rebate of the provincial part of the HST.
The new printed book rebate of the provincial part of the HST is available for HST that became payable after December 31, 2016 without having been paid before January 1, 2017 or if that tax was paid after December 31, 2016 without having become payable before January 1, 2017.
For more information on the printed book rebate, please see Guide RC4034, GST/HST Public Service Bodies' Rebate.
Medical practitioner on-call fees
The Canada Revenue Agency (CRA) has recently received enquiries regarding the application of section 5 of Part II of Schedule V to the Excise Tax Act to the supply of on-call coverage to health care facilities that are required to have a medical practitioner on call. Section 5, together with sections 1.1 and 1.2 of that Part, functions to exempt a qualifying health care supply of a consultative, diagnostic, treatment or other health care service from the application of GST/HST when it is rendered by a medical practitioner (i.e., a doctor or a dentist) to an individual, and is not performed for cosmetic purposes.
To meet the requirement to have a medical practitioner on call, a facility will generally enter into an agreement with a medical practitioner. These agreements generally provide that the medical practitioner will be paid a set fee for remaining on call during a given period of time. The agreements also generally provide that the medical practitioner will be paid additional amounts for intervening in patient care if and when called upon to do so during their on-call period.
When such an agreement is entered into, the medical practitioner supplies the facility with the right to call upon him or her to render health care services to the facility’s patients during a given period of time. The CRA considers this to be a distinct supply of a right by the medical practitioner that allows the facility to meet an operational requirement. At the time the agreement is entered into, it is not known whether the medical practitioner will be called upon to render health care services to the facility’s patients. Moreover, the set fee that is paid for the right to call upon the medical practitioner is not contingent on him or her rendering health care services during their on-call period.
In the CRA’s view, by remaining available to render health care services should the need arise, the medical practitioner fulfils his or her obligation under the agreement. Even if the medical practitioner is called upon to intervene in patient care, he or she must remain available to be called upon again until the end of their on-call period. Therefore, the nature of the supply of the right to be called upon is not dependent upon, altered, or extinguished, by a future rendering of health care services by the medical practitioner to the facility’s patients. The supply of such a right does not qualify as an exempt health care service, or part of an exempt health care service, under section 5 of Part II of Schedule V, as the supply of a right is not exempt under that section.
Accordingly, the supply of on-call coverage to the facility, whether or not the medical practitioner is contacted, would be a taxable supply of intangible personal property subject to GST/HST at the applicable rate (5%, 13% or 15% depending on the province in which the supply is made), provided the medical practitioner is a registrant and is not on call in their capacity as an employee of the facility. The set on-call fee that is paid in respect of this on-call coverage would be consideration for this taxable supply. Additional amounts paid to compensate the medical practitioner for their intervention in patient care would generally be viewed as consideration for an exempt supply, as that intervention would generally qualify as an exempt supply of a health care service under section 5 of Part II of Schedule V. This would be the case where the medical practitioner’s intervention does in fact consist of a qualifying health care supply that is a consultative, diagnostic, treatment or other health care service rendered to an individual, and that is not a cosmetic service.
It should also be noted that if the consideration for the supply of the right to call upon the medical practitioner is payable or reimbursed by the government of a province, under a plan established under an act of the legislature of the province to provide for health care services for all insured persons of the province, the supply of the right may be an exempt supply of property under section 9 of Part II of Schedule V. Whether section 9 would apply in such cases is a question of fact.
Supplies of intrauterine devices
An intrauterine device (IUD) is a small T-shaped device that is placed inside a woman’s uterus by a physician for contraceptive purposes. There are two types of IUDs available in Canada, hormonal IUDs and copper IUDs. Hormonal IUDs have a reservoir which slowly releases hormones used for contraception. Hormonal IUDs are used for three to five years depending on the model. Copper IUDs have a plastic frame that is wound around with copper wire or has copper sleeves. Copper IUDs are used for three to ten years depending on the model.
Part II of Schedule VI to the Excise Tax Act lists medical devices for human use that are zero-rated (taxable at 0%) under the Act. Some devices are zero-rated in their own right, such as supplies of artificial eyes, artificial teeth and hearing aids. Other devices are zero-rated only when supplied under certain conditions (for example, on the written order of a specified professional for use by a consumer named in the order, or when specially designed for use by an individual with a disability). Part II of Schedule VI does not contain any provision that would zero-rate the supply of an IUD.
Although there are no provisions that zero-rate the supply of an IUD as a device, the supply of certain IUDs may be considered to be a supply of a drug for purposes of the GST/HST. Part I of Schedule VI contains provisions that zero-rate a broad range of drugs and substances that are regulated under federal legislation. Paragraph 2(b) of Part I of Schedule VI zero-rates a supply of “a drug that is set out on the list established under subsection 29.1(1) of the Food and Drugs Act or that belongs to a class of drugs set out on that list, other than a drug or mixture of drugs that may, under that Act or the Food and Drug Regulations, be sold to a consumer without a prescription”. For purposes of paragraph 2(b), drug means a drug as defined in the Food and Drugs Act.
CRA has received confirmation that the hormonal IUDs available in Canada contain the drug levonorgestrel which is on the list established under subsection 29.1(1) of the Food and Drugs Act and require a prescription from a physician to be purchased. Health Canada has advised that hormonal IUDs are drugs as defined in the Food and Drugs Act. Therefore, the supply of hormonal IUDs is zero-rated pursuant to paragraph 2(b) of Part I of Schedule VI of the Excise Tax Act.
Please note that copper IUDs are not drugs as defined in the Food and Drugs Act. As they are not drugs, the zero-rating provisions in Part I of Schedule VI do not apply to sales of these products and as such, sales of copper IUDs are subject to GST/HST at the applicable rate (5%, 13% or 15%) depending on the province in which the supply is made.
Registered national arts service organizations
Arts organizations may apply to the Department of Canadian Heritage to be designated as a national arts service organization (when they meet certain eligibility criteria), and subsequently to the CRA for registration under the Income Tax Act (ITA).
The Minister of National Revenue may register an organization under the ITA if certain conditions in that Act and the Income Tax Regulations are met. Once a person is registered, it is a registered national arts service organization (RNASO) for the purposes of the ITA.
For GST/HST purposes, a “charity” is defined to mean a registered charity or registered Canadian amateur athletic association within the meaning assigned to those expressions by subsection 248(1) of the ITA, but does not include a public institution. A “public institution” is defined to mean a registered charity (within the meaning assigned by subsection 248(1) of the ITA that is a school authority, a public college, a university, a hospital authority or a local authority determined under paragraph (b) of the definition ‘municipality’ to be a municipality.
An RNASO is neither a registered charity nor a registered Canadian amateur athletic association within the meaning assigned to those expressions by subsection 248(1) of the ITA. As a result, an RNASO is not a “charity” or “public institution” for GST/HST purposes and does not have any entitlements or obligations as such.
Although the RNASO is not a charity or public institution, the RNASO may be a non-profit organization for GST/HST purposes. A non-profit organization means a person (other than an individual, estate, trust, charity, public institution, municipality, or government) that meets the following conditions:
- It is organized and operated solely for non-profit purposes.
- It does not distribute or make available any of its income for the personal benefit of any proprietor, member, or shareholder, unless the proprietor, member, or shareholder is a club, a society, or an association that has, as its primary purpose and function, the promotion of amateur athletics in Canada.
It is a question of fact whether, at any particular time, an RNASO would meet the definition of a non-profit organization. In particular, whether an RNASO meets the criterion of operating solely for a purpose other than profit must be determined on an ongoing basis. For more information, see GST/HST Policy Statement P-215, Determination of whether an entity is a Non-Profit Organization for purpose of the Excise Tax Act (“ETA”).
More information on how the GST/HST applies to a non-profit organization, including the potential entitlement to claim a public service bodies’ rebate as a qualifying non-profit organization, is discussed in Guide RC4081, GST/HST Information for Non-Profit Organizations. General information on how to collect, record, calculate, and remit the GST/HST applicable to both for-profit and non-profit organizations is provided in Guide RC4022, General Information for GST/HST Registrants, and on the CRA website.
Additional information can be found on the CRA webpage: National arts service organizations and the Department of Canadian Heritage Fact Sheet - Designation as a national arts service organization and as a registered national arts service organization.
Flow-through of tax relief as described in B-039 from one partnership to another partnership
Technical Information Bulletin B-039, GST/HST Administrative Policy – Application of the GST/HST to Indians (B-039) outlines the CRA administrative policy with respect to the application of the GST/HST to Indians, Indian Bands and band-empowered entities.
As explained in B-039’s section entitled Supplies provided by Indians, Indian bands and band-empowered entities, a partnership that has an Indian, Indian band or band-empowered entity as one of its partners (“Indian partner”) will be accorded full tax relief when acquisitions are made in either the name of the Indian partner or the partnership, subject to the conditions outlined in B-039. All conditions outlined in B-039 applicable to the Indian partner must be met in order for the partnership to receive tax relief on its acquisitions; for example, property must be acquired on a reserve or delivered to a reserve, proper documentation must be maintained, and, where the Indian partner is an incorporated band-empowered entity, the acquisition must be made for band management activities.
As a clarification concerning the application of B-039 to partnerships, it should be noted that a partnership is a “person,” as defined under subsection 123(1) of the Excise Tax Act, making the partnership a separate and distinct entity from an Indian individual, an Indian band, or a band-empowered entity. As a result, where a partnership benefiting from tax-relief by virtue of having an Indian partner becomes a partner in another partnership, the tax relief accorded the first partnership cannot flow through to the other partnership.
A general partnership (Partnership A) has been established by a written agreement made between an Indian individual and a non-Indian individual. A second partnership (Partnership B) is established by a written agreement made between Partnership A and another non-Indian individual.
The tax relief accorded under B-039 to acquisitions made by Partnership A by virtue of having an Indian individual as a partner will not flow through to Partnership B.
Designated rent-geared-to-income (RGI) housing providers – ending of government funding
An organization may be designated by the CRA to be a municipality in respect of its supplies of rent-geared-to-income (RGI) housing when it meets the eligibility criteria described below.
Once designated as a municipality, the organization will be able to claim the public service bodies’ rebate (PSB rebate), using the rebate rate for municipalities, for GST/HST paid or payable on its purchases and expenses incurred to provide qualifying RGI housing. This rebate is available only to the extent that the property or services acquired are intended for consumption, use or supply in the course of the activities for which the organization has been designated (designated activities).
An organization designated to be a municipality will remain eligible to claim the PSB rebate as long as it continues to meet all of the four eligibility criteria listed below:
- the organization is a charity, a cooperative housing corporation, a non-profit organization or a public institution;
- the organization supplies long-term residential accommodation within a program to provide housing to low-to-moderate income households;
- more than 10% of the housing units in a particular housing project are provided on a RGI basis; and
- the organization receives funding from a government or municipality to assist it in providing the accommodation within a program to provide housing to low-to-moderate income households.
It should be noted that the municipal designation does not apply to any non-designated activities that an organization may be engaged in such as the supply of residential units that are not on a RGI basis or for which no government subsidy is payable. In other words, the supply of long-term residential accommodation, for which no funding described in item 4 above is received,even if the rent paid for this accommodation is geared to the tenant’s income, is not considered to be within an organization’s designated activities.
With respect to eligibility criterion 4, in order to remain designated as a municipality and in order to qualify for the PSB rebate at the municipal rate, an organization must receive government funding to subsidize the provision of RGI housing to individual tenants. The funding received must be linked to the organization's provision of RGI housing within a program to provide housing to low-to-moderate income households. Acceptable types of funding include ongoing subsidies that make up the difference between the organization's costs to operate the housing units and the RGI paid by the tenants to the organization, and capital funding.
If an ongoing government subsidy in respect of the provision of RGI housing ceases, the housing provider no longer meets the government funding criterion. For example, this may be the case where an operating agreement expires and is not renewed, or where the funding ceases because the housing provider no longer meets the necessary terms and conditions for funding.
When a housing provider no longer meets the government funding criterion, it no longer qualifies for municipal designation and is no longer eligible to claim the PSB rebate for municipalities, as it no longer has designated activities.
Operating agreements entered into with Canada Mortgage and Housing Corporation (CMHC) under section 95 (formerly section 56.1) of the National Housing Act (NHA) for the provision of loans or contributions in respect of social housing projects expire throughout 2012-2020. The Subsidy Surplus Fund (SSF) is a component of the operating agreements and consists of funds from operating surpluses cumulated after all costs and expenses are paid up. Funds in the SSF are to be used solely for the purpose of lowering the cost of housing for low-income households.
When an operating agreement expires, some housing providers may have funds remaining in the SSF. These remaining funds are not considered to be government funding. Therefore, upon expiry of the operating agreement, the housing provider no longer meets the government funding criterion, even if it has funds remaining in the SSF. Accordingly, the housing provider no longer qualifies for municipal designation for purposes of the housing project named in the operating agreement and is no longer eligible to claim the PSB rebate for municipalities in respect of activities relating to that project.
A housing provider should notify the CRA immediately of any changes that may affect its eligibility for municipal designation, including the ending of operating agreements and the termination of government funding.
This can be done by sending a letter detailing the changes to: Director, Public Service Bodies and Governments Division, Excise and GST/HST Rulings Directorate, Canada Revenue Agency, 15th Floor, Tower A, Place de Ville, 320 Queen Street, Ottawa, ON K1A 0L5
For additional information, refer to GST/HST Info Sheet GI-124, Municipal Designation of Organizations Providing Rent-Geared-to-Income Housing.
A housing provider that no longer qualifies for municipal designation may be eligible for a PSB rebate as a different type of PSB rebate claimant, such as a charity or qualifying non-profit organization. For more information see Guide RC4034, GST/HST Public Service Bodies’ Rebate.
Reminder to air travellers security charge registrants, and excise duty and excise tax licensees regarding the filing of returns
The CRA would like to remind air travellers security charge registrants, and excise duty and excise tax licensees of their ongoing obligation to submit a completed return for each reporting period (monthly or semi-annually).
Licensees and registrants must file returns no later than the last day of the fiscal month following the reporting period to which the return relates. For example, for the reporting period December 1 to 31, the return would be due January 31. The total amount payable, if any, must be calculated, a return submitted and the amount paid to the CRA for each reporting period. For more information on available payment options, go to Make a Payment to the Canada Revenue Agency. Please note that a return must be filed even where there is no amount payable.
Failure to file returns in a timely manner may result in:
- Application of a penalty for late filing;
- Issuance of a demand to file notice, and where the person does not comply, application of a $250 penalty;
- Issuance of a notice of assessment of estimated charges, duties or taxes plus applicable interest and penalties; and
- Denial of future licence renewals. In the case of continued non-compliance to file returns may affect future licence renewals.
Calculate instalment payments service
Do you have to pay tax by instalments? If you are an annual filer and your net tax for a fiscal year is $3,000 or more, you may have to make quarterly instalment payments throughout the fiscal year.
This service helps you calculate instalment payments for a specific period-end based on the information you input and information from our records.
Please note that:
- You cannot use the instalment payment calculator to calculate Quebec tax instalments.
- The results of your calculation are not official CRA documents.
- The CRA does not keep any of the information you input to do your calculation.
- The CRA will assess your tax returns to calculate the actual instalment payments you have to make for the years you file.
Prescribed rates of interest
The prescribed annual rate of interest in effect from January 1, 2017 to March 31, 2017, on overdue amounts payable to the Minister is 5%. The prescribed annual rate of interest on amounts owed by the Minister (i.e., rebates or refunds) is 1% for corporate taxpayers and 3% for non-corporate taxpayers. These rates are applicable to income tax, excise tax, the softwood lumber products export charge, GST/HST, 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 3%. Refund interest rates are not applicable for amounts owed by the Minister (i.e., rebates or refunds) for excise duty that is in relation to beer.
|GST/HST, Excise Tax, Softwood Lumber Products Export Charge, Excise Duty (wine, spirits, tobacco), ATSC, Income Tax||Excise Duty
|Period||Refund Interest Corporate Taxpayers||Refund Interest Non-Corporate Taxpayers||Arrears and Instalment Interest||Arrears
|January 1 to March 31, 2017||1%||3%||5%||3%|
|October 1 to December 31, 2016||1%||3%||5%||3%|
|July 1 to September 30, 2016||1%||3%||5%||3%|
|April 1 to June 30, 2016||1%||3%||5%||3%|
Prescribed interest rates for previous years are available on the CRA website at cra.gc.ca/interestrates.
What’s new in publications
The following is a list of new or revised excise and GST/HST forms and publications.
- GST29, Educational Services – Election and Revocation of the Election to Make Certain Supplies Taxable
- GST31, Application by a Public Service Body to Have Branches or Divisions Designated as Eligible Small Supplier Divisions
- GST116, Application, Renewal, or Revocation of the Authorization for a Qualifying Institution to Use Particular Input Tax Credit Allocation Methods
- GST118, Election or Revocation of an Election for a Financial Institution to Use the Prescribed Percentage
- GST190A, GST/HST New Housing Rebate – Appendix A
- GST191, GST/HST New Housing Rebate Application for Owner-Built Houses
- GST192, GST/HST Transitional Rebate Application for Builders of New Housing on Leased Land
- GST193, GST/HST Transitional Rebate Application for Purchasers of New Housing
- GST287, Election or Revocation of the Election by Public Service Bodies to Use the Special Quick Method of Accounting
- GST367, Endorsement to the Bond for Non-Resident Person without a Permanent Business Establishment in Canada
- GST370, Employee and Partner GST/HST Rebate Application
- GST489, Return for Self-Assessment of the Provincial Part of Harmonized Sales Tax (HST)
- GST494, Goods and Services Tax/Harmonized Sales Tax (GST/HST) Final Return for Selected Listed Financial Institutions
- RC151, GST/HST Credit Application for Individuals Who Become Residents of Canada
- RC199, Voluntary Disclosures Program (VDP) Taxpayer Agreement
- RC7066-SCH, Provincial Schedule - GST/HST Public Service Bodies' Rebate
- RC7257, Third Party Authorization and Cancellation of Authorization for GST/HST and QST Rebates for Selected Listed Financial Institutions
Excise duty notices
Excise duty memoranda
- EDM1-1-2, Regional Excise Duty Offices (revised)
- EDM2-2-4, Approved Financial Institutions and Acceptable Bonding Companies
To receive email notification as soon as a document is published on the CRA website, go to the electronic mailing lists page at cra.gc.ca/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.
Forms and publications
- All GST/HST technical publications and GST/HST related forms are available on the CRA website at cra.gc.ca/gsthstpub.
- To access all other forms and publications on the CRA website go to cra.gc.ca/forms and select by topic, document type or publication number.
- 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 cra.gc.ca/slfi 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.
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 cra.gc.ca/businessonline; 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:
- cra.gc.ca/representatives, if you are an authorized representative or employee; or
- cra.gc.ca/mybusinessaccount, if you are the business owner.
For enquiries regarding your softwood lumber products export charge account, you can call 1-866-330-3304.
For enquiries regarding the status of specific GST/HST domestic rebate claims, call Business Enquiries at 1-800-959-5525.
For technical support using our online services:
- business accounts, call 1-877-322-7849
- teletypewriter users, call 1-888-768-0951
- calls outside of Canada and the United States, call collect at 1-613-940-8528
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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