THD – Tax Court of Canada finds that damages received for the “modification” of a supply contract were deemed to be GST-inclusive irrespective of an ITC to the purchaser
A trucking company (THD) had a contract with McKesson Canada for the delivery of pharmaceutical products to various locations. After McKesson eliminated various of the routes and forced a renegotiation of the rates, THD brought an action, which then was settled for a lump sum.
Favreau J found that the lump sum was deemed by ETA s. 182 to include GST (on the basis that THD had received the sum as a consequence of the “modification” of its contract with McKesson), so that it had to itself bear this GST. In response to an argument that this result could unjustly enrich McKesson, Favreau J stated that the s. 182 rule “applied irrespective whether McKesson had claimed an input tax credit respecting the damages paid.”
On a separate issue, he indicated that an input tax credit could not be claimed for GST that had been invoiced to THD, because at the time of claiming its ITC, the invoice did not satisfy the documentary requirements in the applicable Regulation (although, as it turned out, there also was the more fundamental issue that Revenu Québec had retroactively annulled the GST registration number of the supplier in question).
Neal Armstrong. Summaries of THD Inc. v. The Queen, 2018 CCI 147 under ETA s. 182 and Input Tax Credit Information (GST/HST) Regulations, s. 3(b)(i).