DeriveFunctor spuriously rejects existential context with type synonym mentioning the last type variable

This code does not compile:

{-# LANGUAGE ConstraintKinds #-}
{-# LANGUAGE DeriveFunctor #-}
{-# LANGUAGE ExistentialQuantification #-}
{-# LANGUAGE KindSignatures #-}
{-# LANGUAGE StandaloneDeriving #-}
module Bug where

import GHC.Exts (Constraint)

type C (a :: Constraint) b = a

data T a b = C (Show a) b => MkT b
deriving instance Functor (T a)

GHCi, version 8.2.0.20170523: http://www.haskell.org/ghc/  :? for help
Loaded GHCi configuration from /home/rgscott/.ghci
[1 of 1] Compiling Bug              ( Bug.hs, interpreted )

Bug.hs:13:1: error:
    • Can't make a derived instance of ‘Functor (T a)’:
        Constructor ‘MkT’ must be truly polymorphic in the last argument of the data type
    • In the stand-alone deriving instance for ‘Functor (T a)’
   |
13 | deriving instance Functor (T a)
   | ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

But it should, since if you expand C (Show a) b, you're left with Show a, which doesn't mention the last type variable b at all.

Fix incoming.

Trac metadata

Trac field	Value
Version	8.0.1
Type	Bug
TypeOfFailure	OtherFailure
Priority	normal
Resolution	Unresolved
Component	Compiler (Type checker)
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