Supreme Court Clarifies Rules Relating To HST/GST Credits For Public Infrastructure Projects

The Supreme Court of Canada recently released its decision in City of Calgary v The Queen, a case which highlights the importance of early planning to ensure the maximum recovery of goods and services tax ("GST") or harmonized sales tax ("HST") in public infrastructure projects.

OVERVIEW OF GST AND HST

The GST is similar to a value added tax and is applied to most goods and services in Canada at a rate of 5%. Goods and services purchased in a "participating province" are subject to HST at the applicable rate, which range from 12-15%. Currently, the participating provinces are British Columbia, Ontario, New Brunswick, Nova Scotia, Newfoundland and Labrador.¹ Certain goods and services, known as "exempt supplies", are not subject to GST or HST. Where GST or HST is paid by a purchaser on goods or services that will be used in commercial activities, the purchaser may recover all or a portion of the tax paid by claiming an input tax credit ("ITC"). If a purchaser will