Beyond Single vs Multiple Supplies in GST/HST Context

  • 21 avril 2023
  • Shahrukh Khowaja

The tax status of a particular supply usually relies on its categorisation within the bracket of supplies, either taxable, zero-rated or exempt, under the Excise Tax Act (“ETA”). In case of transactions involving various similar elements, the fundamental issue becomes determining whether it is a single supply or a multiple supply. As transactions in the modern world consist of multiple layers, the distinction is crucial and, more often, complicated. Assigning an inaccurate tax status to one or more elements of a transactions could lead to substantial financial loss. Despite CRA’s administrative directives and many court decisions attempting to provide guidance on the matter, to date the proper characterisation of supplies remains uncertain.

CRA’s Administrative Position

The GST/HST Policy Statement P-077R2, Single and Multiple Supplies[1], sets out the CRA's views regarding whether goods or services (or both) provided together constitute one supply or separate supplies. The CRA's position is that multiple supplies occur when one or more of the elements can sensibly or realistically be broken out. Conversely, two or more elements are part of a single supply when the elements are so intertwined and interdependent that they must be supplied together. The policy statement attempts to elaborate on the meaning of these phrases and discusses various factors to be considered in making the determination such as:

  1. the relationship between the elements;
  2. the understanding between parties as to what is being supplied;
  3. Whether the elements could be substituted or supplied separately;
  4. Number of recipients and suppliers; and
  5. The manner consideration is paid.

The list of relevant factors is not exhaustive. The policy statement explains that if the analysis concludes there are multiple supplies, the next step is to determine whether one of those supplies is incidental to another and whether it may consequently be deemed to form part of a single supply in accordance with section 138 of the ETA. According to the policy statement, to be considered incidental, a supply generally plays only a minor or subordinate role in relation to the provision of another supply.