Loupy’s – Tax Court of Canada confirms that a backdated GST registration has retroactive effect – and that winding-down operations qualified a de-registrant as a “registrant”

When the operator of a restaurant ceased operations due to a termination of its lease, it applied for and was granted a revocation of its GST and QST registrations. The ARQ then assessed it under s. ETA s. 171(3) (and presumably the Quebec equivalent) which (in conjunction with the change-of-use rules) effectively imposes GST on the fair market value of the taxpayer's capital property (here, all the restaurant equipment) where the taxpayer has ceased to be a registrant.

Favreau J found that, notwithstanding the revocation of its revocation, the taxpayer was still a “registrant” – whose definition includes a “person who is required to be registered” - given that it still held equipment which it was seeking to sell (some of which it sold eight months’ later). Thus, it was not subject to the deemed supply under s. 171(3)(b).

More than two years after its revocation of the taxpayer’s registration, the ARQ had restored the taxpayer’s registration with the same effective date as the original registration. Favreau J accepted that this restoration of the registration number was retroactive, so that even if (contrary to be above finding) the taxpayer had ceased to be a registrant, “the registration number was…valid throughout the period at issue.”

Neal Armstrong. Summaries of Restaurant Loupy's Inc. v. The Queen, 2016 CCI 260 under ETA s. 171(3)(b) and s. 240(1).