In Global Cash Access (Canada) Inc v The Queen 2012 TCC 173 the Tax Court of Canada considered the question of characterising a bundle of supplies in the context where at least one of those supplies was an input taxed financial supply. While the Canadian GST legislation is different, the approach adopted by the Court was similar to what one would expect from the Federal Court here – i.e., looking at the “substance and reality” of the transaction to identity whether there is a single supply or multiple supplies. What is interesting from the judgment is that the Court was required to undertake this process in the context of financial transactions.
The facts of the case can be shortly stated:
- Global provided a service to patrons of a Casino whereby they were able to use their credit cards to obtain cash for gaming purposes. Patrons paid a fee to Global for this service (“Global Fee”) and Global in turn paid a fee to the casinos for facilitating the service (“Casino Fee”). The question was whether the Casino Fee was consideration for an exempt (input taxed) financial service by the Casinos.
- Under the arrangement, Global “sells” cheques to patrons which are then exchanged with the Casino for cash. From the standpoint of patrons, the transaction is similar to a credit card used to purchase goods, save that a fee is charged (in the range of $17 per $100).
- In a typical case, a transaction is initiated at one of several unmanned “kiosks” belonging to Global which are placed on the floor of the Casino. Once approved, the transaction is completed at one of the Casino’s cashier cages. Alternatively, a patron may initiate and complete the transaction at the cashier cage.
- After the transaction is approved, the cashier prints a cheque payable by Global to the Casino, the cashier negotiates the cheque and provides cash (or gaming chips) to the patron. The cheques are subsequently deposited by the Casinos into their bank accounts.
- Settlement of the transactions takes place a few days later. The card issuing bank remits to Global the amount of the cash advance inclusive of the Global Fee. Global then settles the cheque deposited by the Casino and pays the Casino Fee separately.
Global submitted that the Casinos made only one supply, constituted by two parts, arranging for the issuance of Global’s cheques and cashing the cheques. Each part falls within the definition of financial service. The Revenue contended that the Casinos did not supply any financial services to Global, but rather made a bundle of supplies all of which were excluded from the definition of financial services.
The Court did not agree with either party, but found that Casinos made a bundle of supplies, and part were financial services (being the cashing of the cheques) and part were not. Further, the appropriate apportionment of the consideration applicable to the cashing of the cheques was 25%.
The Court found that there were three main aspects to the bundle of supplies made by the Casinos to Global:
- allowing kiosks on the premises
- providing support services at the cashier cages such as transaction procedures and initiating transactions on behalf of patrons; and
- cashing Global’s cheques
The Court found that each of these activities fell within the definition of “financial services”. This was because the definition extended to “the arranging for” services what are financial services (somewhat similar to Item 13 of the table under s 40-5(2) of the GST Act). In doing so, the Court adopted a broad view of the term “arrange for”.
The Court found that the first two activities were excluded from the definition of financial services through specific exclusions which were introduced into the Act in 2010 (on a retroactive basis in response to judicial decisions). The activity of cashing cheques was held to be a financial service. This required the Court to consider whether the “bundle of supplies” should be viewed as a single supply or multiple supplies. In concluding that there were multiple supplies, the Court found as follows:
- the supplies were not so interdependent that they could be considered a single supply
- it rejected Global’s submission that there was only one supply because each part of the supply is of no use on its own
- none of the elements were a minor part of the supply so as to be incidental to the major supply
- an allocation of the consideration to taxable and exempt supplies was therefore appropriate. The cashing of cheques was an essential supply, but not the predominant supplies (which where the other activities). Accordingly, 25 per cent of the consideration should be allocated to the cashing of cheques.