28 March 2001 GST/HST Ruling 30947 - Section 211 Election -

Dear XXXXX

Thank you for your corporation's letter of March 31, 2000 signed by XXXXX (with attachments) addressed to our XXXXX Tax Services Office (TSO), concerning a section 211 (All legislative references are to the Excise Tax Act (ETA).) election by your client XXXXX). As indicated to you in our letter of September 13, 2000, your letter has been transferred to our office for direct reply to you. We also appreciate additional information and documents received in our office on February 21, 2001.

Statement of Facts AND TRANSACTIONS

From your letter of March 31, 2000 and subsequent conversations, our understanding of the facts and transactions is as follows:

1. Your client is a municipality registered for GST purposes. Therefore, your client is a public service body (PSB) as defined in subsection 123(1).

2. XXXXX[.]

3. XXXXX[.]

4. XXXXX XXXXX[.]

5. XXXXX has been using the subject building mainly as a health unit. It has also subleased a portion of the building to a doctor and to a legal firm.

Ruling Requested

1[.] Is your client XXXXX eligible to make a section 211 election at this time with respect to the subject building with XXXXX, i.e. the time of acquisition of the building?

2[.] If your client is allowed to make such an election,

[(]a) Would it be eligible for input tax credits (ITCs) in respect of any GST paid upon the acquisition?

(b) Would it be eligible for ITCs in respect of tax paid on the cost of operating the building?

(c) Would it be responsible to account for GST on the lease of the building to the XXXXX from the effective date of the s. 211 election to the present?

Ruling Given

Based on the facts set out above, we rule that

1. At this time, your client is not entitled to make a section 211 election XXXXX, as subsection 211(5) requires that the election be filed within one month after the end of the GST reporting period in which the election becomes effective.

2. As your second ruling request is conditional on a positive answer to the first, it will not require an answer.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the attached GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

1. As stated above, subsection 211(5) requires that the election be filed within one month after the end of the reporting period in which the election becomes effective. As your client is a quarterly filer for GST purposes, if it wanted to choose an effective date between January 1, 2001 and March 31, 2001 for example, it should submit its application for the section 211 election before May 1, 2001.

2. We would like to draw to your attention the point that the supply of the subject building between a municipality and one of its para-municipalities qualifies for exemption from GST under section 28 of Part VI of Schedule V to the ETA, regardless of a section 211 election. Such an election would affect the exemption under section 25 (Paragraph 25(g) exclusion provision covers section 25 supplies where a section 211 election is filed.) of Part VI of Schedule V to the ETA, but not the exemption under section 28. Due to the GST exempt nature of your client's supplies of the building, your client would not be entitled to ITCs in respect of tax paid on any inputs used to make such supplies.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9587.

Yours truly,

Bao Tran
Real Property Unit
Financial Institutions and Real [P]roperty Division
Excise and GST/HST Rulings Directorate

Encl.:   Memorandum Series 1.4