Road Maintenance Agreements and GST

Res #: 33-11A
Number: 33
Year: 2011
Midterm: No
Expired: Yes
Responses Received: No
Departments: Canada Revenue Agency (CRA)

BE IT RESOLVED, that SARM lobby the Canada Revenue Agency to have Road Maintenance Agreements exempt from GST.

Response from Honourable Gail Shea, P.C., M.P., Minister of National Revenue:

Thank you for your correspondence sent on behalf of The Saskatchewan Association of Rural Municipalities requesting a meeting to discuss the application of the goods and services tax/harmonized sales tax (GST/HST) to fees collected under municipal road maintenance agreements involving the right to use municipal property. Please accept my apology for the delay in responding.

I regret that I am unable to schedule a meeting with you at this time but can offer you the following information about the situation you describe.

The Canada Revenue Agency (CRA) is responsible for administering the Excise Tax Act, which governs the GST and the HST in the participating provinces. The GST/HST applies to most goods and services sold or provided in Canada, and in Saskatchewan the GST applies at the rate of 5%.

Under the Act, many supplies made by municipalities and other public sector bodies are exempt from the GST/HST. However, certain supplies made by municipalities, such as a right to enter, to have access to, or to use property such as roads of the government, municipality, or other body, are specifically excluded from exemption and are subject to the GST/HST.

Businesses that are registered for the GST/HST can claim input tax credits (ITCs) to recover the tax paid on purchases and expenses, such as fees for road access, that they use, consume, or supply in their commercial activities. Similarly, a municipality that is registered for the GST/HST and engaged in taxable commercial activities can recover the tax paid on supplies related to those activities through ITCs.

A municipality can also claim a rebate to recover 100% of the GST and the federal portion of the HST paid or payable on eligible purchases and expenses that cannot be recovered through ITCs. Please note that a municipality does not have to be registered for the GST/HST to apply for a municipal rebate.

While the CRA administers tax legislation, the Department of Finance Canada is responsible for changes to the legislation. I am therefore forwarding a copy of our correspondence to the Honourable James M. Flaherty, Minister of Finance, for his consideration.

If you have more questions, please contact Mr. Philippe Nault, Director of the Public Service Bodies and Government Division, by writing to 14th Floor, Tower A, Place de Ville, 320 Queen Street, Ottawa ON K1A 0L5, or by calling 613-954-7656. The CRA accepts collect calls. Mr. Nault is aware of our correspondence and will be pleased to answer your questions.

I trust that the information I have provided clarifies the CRA’s position on this matter.

Response from Departmental Correspondence Unit, Department of Finance Canada:

We acknowledge receipt of your correspondence of May 25, 2011, which was referred by the Minister of National Revenue, the Honourable Gail Shea, to the Minister of Finance, the Honourable James M. Flaherty.

Please be assured that your comments will be brought to the Minister’s attention as soon as possible.