CRA considers that GST erroneously paid on a volume rebate is not tax paid in error so that a credit therefor on assessment is not available

On audit, CRA is required by ETA s. 296(2.1) to apply an unclaimed rebate for tax paid in error against the net tax otherwise assessed. However, there is an unpublished CRA interpretation indicating that where the registrant added GST to volume discounts paid to its clients by way of credit notes (erroneously failing to recognize that the original sales had been zero-rated so that there was no GST to rebate), CRA will not consider such tax to be tax paid in error, so that a credit under s. 296(2.1) is not available.

Neal Armstrong. Summary of Robert Demers, "Indirect Tax considerations in M&A Due Diligence," draft 2015 CTF Annual Conference paper under ETA s. 296(2.1).