Villa Ste-Rose – Tax Court of Canada finds that interest and penalties on a late-filed GST return should be computed after netting rebate claims against the gross GST payable
A company that was not registered for GST purposes was required to self-assess itself under ETA s. 191(3) for GST on the fair market value of an assisted-living facility constructed on its behalf. It filed the required return in this regard 9 months’ late. With that return it also included rebate claims which were higher than the s. 191(3) tax. CRA accepted the GST payable and rebate amounts, but assessed interest and penalties under ss. 280 and 280.1, calculated on the gross GST amount, which it effectively treated as having been owing for the full 9-month period.
D’Auray J considered this approach to be unfair and anomalous, since if the company had instead lain in the grass and been assessed by CRA for the unreported GST, CRA would have been required under s. 296(2.1) to allow the (more than) offsetting unclaimed rebate amounts, so that no interest or late-fiing penalties could have been assessed by it. Furthermore, on her reading of s. 228(6), she considered that the same result obtained, i.e., under this rule as well, CRA was required net the rebate claims against the gross GST payable for interest and penalty purposes.