Quinco Financial – Tax Court confirms gap in the HST/GST credit note rules

The HST/GST credit note rule provides that where a registrant receives a credit note for a taxable purchase made by it, any HST or GST included in that credit note will be added to its net tax liability for the reporting period in which it received the credit note to the extent that it had claimed an ITC for the related purchase in its return for that or a preceding reporting period.  The legislative drafter missed the point that ITC claims can be deferred for months or even years following the month in which the original purchase occurred, so that it is quite possible that the related ITCs will not be claimed until a return for a reporting period following that in which the credit note was received.

D'Auray J. has confirmed this legislative gap, so that the registrant got full ITCs for the GST on its original purchases notwithstanding that it subsequently received credit notes for $2.3M of those claims.

Neal Armstrong.  Summaries of Quinco Financial Inc. v. The Queen, 2013 TCC 20 under ETA s. 232(3) and 298(4).