Canada Gazette

The Deduction for Provincial Rebate (GST/HST) Regulations (Federal Regulations), together with subsection 234(3) of the Excise Tax Act (ETA), facilitate the delivery, at the point of sale, of a rebate of the provincial component of the Harmonized Sales Tax (HST) on printed books and related items that the HST participating provinces (New Brunswick, Nova Scotia and Newfoundland and Labrador) provide to purchasers of those items.

The rebate in each participating province is provided under authority of an Act of the legislature of that province and regulations made under it. Rebates can be obtained by filing an application or be paid or credited by vendors as a point-of-sale rebate. In order to facilitate the point-of-sale rebate, the federal government provides a mechanism whereby vendors can deduct from their net tax remittances the amount of the rebate they pay to or credit in favour of purchasers. Subsection 234(3) of the ETA provides for this deduction. The amount of the deduction is specified in the Federal Regulations as equal to the amount of the provincial rebate in respect of the HST paid or credited in respect of the supply of any of the items listed in the Federal Regulations.

Effective September 1, 2006, the governments of New Brunswick, Nova Scotia and Newfoundland and Labrador have announced amendments to their respective provincial regulations to expand their provincial rebates to include certain combined products whose components are a printed book sold with a CD-ROM or a textbook sold with either a CD-ROM or the access code to a Web site. The Federal Regulations are amended effective September 1, 2006, by adding these combined products to the items listed in the Federal Regulations. This addition has the effect of facilitating the participating provinces' expansion of their rebates by allowing vendors to deduct from their net tax an amount equal to the provincial rebate they pay to or credit in favour of purchasers of these combined products.

Subsection 234(3) of the ETA provides that the deduction permitted under that subsection is to be prescribed by regulations. Therefore, there is no alternative to amending the Federal Regulations.

The amendments to the Federal Regulations were developed at the request of, and in close consultation with, the participating provinces.

David Sierra-Baigrie, Sales Tax Division, Department of Finance, 140 O'Connor Street, Ottawa, Ontario K1A 0G5, 613-995-8380; or Goods Unit, Excise and GST/HST Rulings Directorate, Canada Revenue Agency, Place de Ville, Tower A, 320 Queen Street, Ottawa, Ontario K1A 0L5, 613-954-4397.

Notice is hereby given that the Governor in Council, pursuant to subsection 234(3) (see footnote a) and section 277 (see footnote b) of the Excise Tax Act, proposes to make the annexed Regulations Amending the Deduction for Provincial Rebate (GST/HST) Regulations.

Interested persons may make representations with respect to the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of the publication of this notice, and be addressed to David Sierra-Baigrie, Sales Tax Division, Department of Finance, L'Esplanade Laurier, 16th Floor, East Tower, 140 O'Connor Street, Ottawa, Canada K1A 0G5.

1. Section 1 of the Deduction for Provincial Rebate (GST/HST) Regulations (see footnote 1) is amended by adding the following in alphabetical order:

"composite property" means property that is wrapped, packaged or otherwise prepared for sale as a single product the only components of which are a printed book and

(a) a read-only medium that contains material all or substantially all of the value of which is reasonably attributable to one or more of the following:

(i) a reproduction of the printed book, and

(ii) material that makes specific reference to the printed book and its content and that supplements, and is integrated with, that content; or

(b) if the product is specially designed for use by students enrolled in a qualifying course, a read-only medium or a right to access a website, or both of them, that contains material that is related to the subject matter of the printed book. (bien mixte)

"qualifying course" means a course the supply of the service of instructing in which,

(b) would be an exempt supply included in Part III of Schedule V to the Act but for the fact that the supplier of the service has made an election under that Part. (cours admissible)

"read-only medium" means a tangible medium that is designed for the read-only storage of information and other material in digital format. (support non inscriptible)

2. The schedule to the Regulations is amended by adding the following after item 3:

3. Sections 1 and 2 are deemed to have come into force on September 1, 2006.