Posted by: LYF | December 14, 2008

GST and Horse Racing

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.



  1. The first time I read that my brain blew up…but it made sense the second time.
    This seems like a good example of why rule based accounting fails…you can use the wording to find loopholes.

  2. I just need to understand whether you’re dealing with a racetrack or a horse breeder, or some third category…? 🙂

  3. I think it’s a third category. The guy incorporated a company and then bought two horses through it. So he races the horses through the company – so to speak.

  4. DK – if you want your head to explode, read about flow through shares. I’m in the middle of trying to figure them out.


    • Is the purpose of the corporation to sell horses? Or does this corporation own horses, which it races and has decided to sell one of it’s racing horses?

  6. I would hate to break to you all but you’re way off. See ATO guide ” GST for the racing industry”.

    • Am I way off because you’re assuming I’m in Australia instead of Canada?

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