Good afternoon.
Part 2 of the bill makes changes to the GST and HST. The amendments appear in clauses 106 to 164.
I'm going to describe the measures in the order they appear in the summary, with only one exception, given that two of the measures are more closely linked.
I want first to say that all the amendments in part 2 of the bill are technical in nature and generally correct small deficiencies to ensure that the rule applies as intended. All of the measures in part 2 of the bill, except the PSB rebate measure, were released for consultation for the first time in the summer of 2016. These measures have also been confirmed in budget 2017, and they were re-released for consultation in the summer of 2017 with a small number of improvements. No request for amendment was received from stakeholders during the second consultation.
The first measure makes technical amendments to the GST/HST pension plan rules. Existing GST/HST rules ensure that pension plans receive the same GST/HST treatment whether pension expenses are incurred by an employer participating in a pension plan or directly by a pension trust or a pension entity of the pension plan.
These rules also generally provide a 33% GST rebate to pension trusts and pension corporations in respect of their expenses and their expenses that are deemed to have been incurred. These rules are fairly sophisticated and came into force relatively recently, in 2009. Certain small deficiencies and mistakes had been identified over the years by stakeholders and internally by the government. The proposed measure makes technical amendments to these GST/HST rules to clarify certain points, correct technical deficiencies or errors, and simplify compliance.
The second measure I'm going to talk about deals with GST/HST treatment of master trusts and master corporations. What master trusts and master corporations do is hold and invest funds of individual pension plans, and planned pension plan corporations too. They do that in order to diversify the risk and reduce the costs. These amendments ensure that the same GST/HST treatments apply to pension plans and related expenses whether the funds of the pension plan are invested directly in a trust or a corporation of a single pension plan, or whether the money is being invested in a master corporation or a master trust.
The third measure that I'm going to talk about, and it's part of the first item in the summary, is a measure to make technical amendments to the GST/HST rule for financial institutions.
Financial institutions are subject to special GST/HST rules, and this is due to the complexity of the financial service industry. Because financial services are exempt under the GST/HST, financial institutions are generally not allowed to recover, through input tax credit, the tax they pay on expenses they incur to provide those financial services. This is contrary to general commercial activity businesses, where they charge tax on their output but they claim an input tax credit on their inputs.
These rules are fairly sophisticated in certain cases, and technical anomalies are identified from time to time. The measure here makes technical amendments to these rules to clarify certain points and reflect amendments to the Income Tax Act. Concepts of the Income Tax Act are referred to in the Excise Tax Act, and sometimes there's a modification in the Income Tax Act and the Excise Tax Act has to catch up. Also, there are rules to simplify compliance.
The fourth measure, which is the third item on the summary, makes a technical amendment to the GST/HST drop shipment rules. The drop shipment rules help Canadian businesses that sell to non-residents by ensuring that non-resident businesses do not incur unrecoverable GST/HST when they acquire goods in Canada.
The amendments that are made to those rules provide a new tax relief mechanism, and this is in a situation where an existing tax relief mechanism was not functioning for technical reasons. The amendments also extend the application of the drop shipment rules in respect of certain leased goods and generally make technical improvements to those rules.
The next measure relates to municipal transit. Municipal transit services are exempt under the GST/HST. This measure clarifies that the GST/HST exemption for municipal transit service also applies to supply of tickets, passes, and other similar rights entitling individuals to receive municipal transit services. The amendment is proposed to reflect the modern way in which transit services are supplied and paid for, which can often be better characterized as supplies of rights as opposed to supply of service.
In practice, these amendments do not change anything, because they simply codify the ways the CRA has been interpreting relief over the years.
The next amendment would improve the manner in which public service bodies can claim public service body rebates. For the purpose of the GST/HST, public service bodies are entities such as municipalities, schools, public colleges, public hospitals, charities, and substantially government-funded non-profit organizations.
The amendment would provide these public service bodies with an improved flexibility in claiming their rebate of the GST/HST. It would generally allow public service bodies to claim, in a subsequent claim period, a rebate of GST/HST that has been paid in a previous claim period, for a period of up to two years. This is a simplification measure, because it's less burdensome to claim in a subsequent period a rebate that you may have forgotten in a previous period than it is to use the current process, which is to make an amended rebate claim.
The last measure in part 2 is a housekeeping amendment to make the legislative provisions governing GST and HST more precise and consistent. The measure does not amend the application of the GST or HST. Essentially, it is meant to make the English and French versions of the act consistent, update references to certain tax-related terms, make changes related to bijuralism, and correct errors, references and other items of that nature.
That concludes my explanation of the measures in part 2 of the bill.