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Fourth quarter 2006

In the transportation industry, an extra charge may be added to the consideration indicated on the invoice for the transportation service, to compensate for the fuel price increase. Suppliers of transportation services can therefore recover all or a portion of the increased fuel costs they pay, without adjusting the price of the transportation service they supply.

The extra charge is part of the consideration for the transportation service. Consequently, the goods and services tax (GST) and the Québec sales tax (QST) are calculated on this amount at the same rates as the remainder of the consideration for the transportation service.

Where the transportation service is GST-taxable at the rate of 6% and QST-taxable at 7.5%, all the costs relating to this service, including the extra charge paid to compensate for the increase in fuel price, are subject to GST and QST at the same rates.

However, where a transportation service is zero-rated (that is, subject to GST and QST at the rate of 0%), no tax is payable on the costs relating to this transportation service, including the extra charge.