Last week I was preparing a notice to reader for a client who owns a horse racing company. When I handed in the file, my partner asked whether the winnings attracted GST. I hadn’t included “GST collected” on the return so it was an appropriate question. They weren’t included in the “winnings statements” so I assumed winnings didn’t attract GST. I wasn’t completely sure, so I went back to my desk and called CRA. They told me they weren’t, so I went back to my partner and relayed the information. He wasn’t very pleased with my level of “research.”
CRA is good for asking simple questions like locating a form on their website, or when to remit certain taxes. When things are more complicated, they’re not the best resource. Learning from my mistake, I went back and researched the difference between zero-rated and GST exempt supplies, called the race track and went through the excise tax act.
Turns out in section 188 paragraph 2 subsection a, “the giving of [a] prize shall be deemed, for the purposes of this Part, not to be a supply.” So if it’s not a supply it can be assumed not to incur GST. It’s a weird logic and I still have trouble wrapping my head around it. What’s more confusing is that,
“Exempt supplies are not subject to the GST/HST. Persons making only exempt supplies are not entitled to claim ITCs for the GST/HST paid or payable on purchases, importations or other acquisitions relating to the making of exempt supplies. More information on ITCs will be available in Chapter 8, Input Tax Credits: Eligible ITCs.”
So if the supply of a prize was considered exempt I’m assuming the company would not be allowed to claim ITC’s. However, as the act deems prizes “not to be a supply” it side-steps this problem.
It might sound lame, but I considered that a “cool” day at work.