The CRA recently confirmed its view that administrative services provided by a Regional District to a Regional Hospital District are subject to GST. The CRA ruling turned on the fact that a regional hospital district does not perform any governance functions and is therefore not a municipality for GST purposes. Without that status, the administrative services provided by the regional district to the regional hospital district do not fit within a GST exemption.

In British Columbia, regional districts are made up of municipalities and unincorporated areas referred to as electoral areas. Regional districts have responsibility for some basic local services and governance related to inter-municipal and cross-boundary matters. Regional hospital districts, on the other hand, are primarily designed to provide the local share of capital funding for hospital planning and construction, which it pays for by raising property taxes in its geographic area. Regional hospital districts should not be confused with regional health authorities; regional hospital districts do not provide health services, while health authorities do. The boundaries of regional districts and regional hospital districts are often, though not always, the same, and the directors of the regional hospital district are often the elected members of the regional district. Given the close geographic and governance linkages, it is not surprising that regional districts often provide administrative services to regional hospital districts.

In the particular circumstances of this GST ruling the regional district was providing administrative support services to the regional hospital district but not charging GST. The regional district took the position that the regional hospital district is a regional municipality such that the administrative services are exempt from GST under section 28 of Part VI of Schedule V of the Excise Tax Act (s. V-VI-28).

Section V-VI-28 exempts supplies between a municipal body and any of its para-municipal organizations, between para-municipal organizations of the same municipal body, a regional municipality and any of its local municipalities, etc. The problem in this case is that the the regional hospital district is not a municipal body (it does not provide local governance; governance does not include raising funds for capital health projects) or a para-municipal organization (its not owned or controlled by a municipal body). Accordingly, the exemption in s. V-VI-28 is not available for the administrative services provided by the regional district to the regional hospital district. The CRA noted that there is no other applicable exemption, so the administrative services provided by the regional district to the regional hospital district are subject to GST.

This ruling highlights how the GST treatment of inter-governmental goods and services is not always intuitive. While it seems reasonable that the administrative services by one provincial-created governmental organization to another would be GST exempt, that is not always the case.

The CRA released a redacted version of the ruling (GST Ruling Letter No. 161401 (January 3, 2019)) on July 15, 2019.