Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 182079
Dear [Client]:
Subject: GST/HST RULING
Impact of 8% electricity rebate in Ontario on ITCs and RITCs
Thank you for your fax of January 27, 2017, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of electricity in Ontario. Specifically, how the Ontario 8% electricity rebate program impacts input tax credits (ITCs) and the recapture of ITCs (RITCs).
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand the following:
1. The Ontario government passed legislation, the Ontario Rebate for Electricity Consumers Act, 2016 (Ontario Rebate Act), on November 2, 2016.
2. The Ontario Rebate Act provides for the financial assistance to certain Ontario electricity recipients in respect of charges for electricity.
3. Recipients receive the financial assistance by means of an 8% reduction in the amount payable for electricity.
4. The 8% rebate amount is shown as a separate line item that reduces the total amount payable for electricity after the HST has been calculated and applied.
5. You have presented the following example:
* A $1,000 hydro invoice would normally have incurred $130.00 of HST. There would now be a reduction of $80.00 on the invoice, meaning an amount due to the electricity provider of $1,050. Two alternatives present themselves:
i. The amount to be claimed an ITC would be $50.00. The $80.00 reduction would be treated similar to a point-of-sale rebate.
or
ii. The amount to be claimed as an ITC would be $130.00. The $80.00 reduction would be treated as a direct reduction of electricity costs.
RULING REQUESTED
You would like to know how the rebate will impact ITCs and RITCs.
RULING GIVEN
Based on the facts set out above, we rule that the value of ITCs that may be claimed are not reduced or affected by the receipt of the Ontario rebate in respect of electricity charges.
Furthermore, the requirement to recapture the portion of any available ITCs is not affected with the receipt of the Ontario rebate.
EXPLANATION
Pursuant to subsection 165(1), every recipient of a taxable supply made in Canada shall pay tax in respect of the supply calculated at the rate of 5% on the value of the consideration for the supply. Pursuant to subsection 165(2), every recipient of a taxable supply made in a participating province shall pay in addition to the tax imposed by subsection 165(1), tax in respect of the supply calculated at the rate of tax for that province (Ontario 8%) on the value of the consideration for the supply.
Generally, under section 169 of the ETA, where a person acquires or imports a property or service or brings it into a participating province during a reporting period of the person during which the person is a registrant and the GST/HST in respect of the property or service becomes payable by the person or is paid by the person without having become payable, the person will be eligible to claim an ITC in respect of the tax to the extent that the property or service is acquired, imported or brought in for consumption, use or supply in the course of the person's commercial activities.
The Ontario rebate is financial assistance provided by the province to eligible recipients of electricity and serves to reduce the total amount payable by the recipients. The rebate is not a reduction in consideration for the supply of electricity, nor is it a reduction to the HST payable in respect of the supply of electricity. The Ontario rebate does not alter the value of the ITC that is otherwise claimable by a registrant.
With the introduction of the HST in Ontario, large businesses, as defined in section 27 of the New Harmonized Value-Added Tax System Regulations No.2, are required under section 236.01 of the ETA to recapture the portion of any available ITC that is attributable to the provincial part of the HST that becomes payable, or is paid without having become payable, in respect of a specified property or service.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-721-5081. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Peter Pushkarna
Basic Groceries & Recaptured Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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