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Ottawa, December 21, 2001
2001-126

Proposed GST/HST Amendment affecting School authorities

Finance Minister Paul Martin today announced a proposed amendment to the Excise Tax Act relating to the treatment under the goods and services tax/harmonized sales tax (GST/HST) of school authorities and their provision of student transportation services.

The proposed amendment does not affect the users of school bus services. It is intended to ensure that the provision of these services by school authorities continues to be treated as an exempt activity under the GST/HST.

In a recent decision, the Federal Court of Appeal held that, under certain provincial funding arrangements, the supply of student transportation services by school authorities could be subject to the GST/HST rules applicable to taxable activities, instead of the rules applicable to exempt activities. As a consequence, the school authorities would avail themselves of the 100-per-cent input tax credit, instead of the 68-per-cent public service body rebate, to recover tax paid on related inputs. This result is inconsistent with the policy underlying the GST/HST.

Accordingly, it is proposed that an amendment be made to ensure that the service of transporting elementary or secondary school students to or from a school operated by a school authority is treated as an exempt service where it is supplied by a school authority to a person other than another school authority.

To ensure consistent exempt treatment regardless of how these services may have been funded, the amendment is proposed to be effective from the date of introduction of the GST. However, the proposed amendment will not affect any case that has already been decided by the Federal Court.

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