CRA finds that full compensation to a customer who returned goods precluded access to the GST/HST consideration-adjustment rule

CRA accepts that ETA s. 232 generally applies where a supplier refunds the purchase price of goods that are returned to it by its customer, so that there is no need for the customer to charge GST/HST on the refund payment. However, CRA considered that s. 232 was not available where the supplier, in addition to refunding the purchase price for the returned goods, also covers the incremental freight costs of the customer.

This is odd. If the supplier only refunded the purchase price, and then made a further payment in settlement of a damages claim for not also covering the retailer’s incremental freight expenses, the refund could clearly be covered by s. 232, and the damages payment would be a non-taxable receipt to the customer.

Neal Armstrong. Summary of 21 December 2017 Ruling 157478 under ETA s. 232(2).