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Ottawa, August 29, 1996
1996-057

Finance Department Announces Changes to Proposed GST Amendments

The Department of Finance today announced a number of changes to the proposed GST amendments that were introduced by the government on April 23, 1996.

The changes include transitional relief for the GST treatment of used goods and sales by agents and auctioneers, and to the proposed amendments regarding the treatment of memberships in certain non-profit organizations.

Treatment of Used Goods, Sales by Agents and Auctioneers

Under the proposed changes announced in April, notional input tax credits were eliminated for most transactions in favour of a trade-in approach, the special rules for appreciating used goods were eliminated, and changes were introduced for sales by agents and auctioneers. These measures were to be effective for all supplies made after April 23, 1996.

Following consultations with business, the government is proposing transitional relief for the period beginning April 24, 1996 and ending June 30, 1996. The proposed amendments will generally continue to apply for registrants who adopted the new rules as of April 24. However, where a registrant operated under the previous rules during the transitional relief period, the registrant will be entitled to claim notional input tax credits under the following circumstances:

• In trade-in situations, where, under a written agreement, a registrant accepted used goods as full or partial payment, and tax was charged on the full price of the good, the registrant will be entitled to claim the notional input tax credit in accordance with the previous rules. However, a notional input tax credit will not be available if the used good was accepted as a part of a trade-in and the new trade-in rules were applied.

• In cases other than trade-ins, where a person not required to charge tax supplies a used good to a registrant on or before June 30, 1996, a notional input tax credit will be available to the registrant if the good was acquired for the purpose of consumption, use or supply in the course of the commercial activities of the registrant.

• For appreciating used goods, the special rules restricting the availability of actual and notional input tax credits, and the recapture provisions for exports and zero- rated supplies, will not apply to transactions entered into after April 23, 1996.

With regard to sales by agents and auctioneers, the previous rules will continue to apply in the following circumstances:

• where goods were sold by an auctioneer on or before June 30, 1996 on behalf of a person who would not have been required to collect tax if the person had sold the goods directly, and the auctioneer at any time pays or credits to the person an amount equivalent to the notional input tax credit available to the auctioneer;

• goods that were sold, otherwise than by auction, on or before June 30, 1996, by an agent on behalf of a disclosed principal who would not have been required to collect tax if the principal had sold the goods directly, provided that the GST was not charged or collected on the supply; and,

• goods that were sold, otherwise than by auction, by an agent on behalf of an undisclosed principal who would not have been required to collect tax, provided the sale was made on or before June 30, 1996, and the principal is paid or credited an amount equivalent to the notional input tax credit available to the agent.

Treatment of NPO Memberships

On April 23, 1996 the government announced its intention to remove the exemption for certain memberships in non-profit organizations. After consultations with the sector, the government has decided not to proceed with this proposed change.

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For further information:

Contact your local Revenue Canada Tax Service Office