Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
XXXXX
Case Number: 90107
August 21, 2008
Subject:
GST/HST INTERPRETATION
GST Quarterly instalments
Dear XXXXX:
This refers to your XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to a registrant who is 30 days late in making a quarterly instalment of GST.
All legislative references are to the Excise Tax Act (ETA) and the regulations there under, unless otherwise specified.
Interpretation Requested
With respect to the application of penalty and interest under subsection 280(1), you would like to know if a registrant who is 30 days late in making a quarterly GST instalment could reduce the penalty and interest by making the next quarterly instalment 30 days early? Both of the above quarters are within the same fiscal year and the registrant is an annual filer.
Interpretation Given
Based on the information provided, a registrant who chooses to make a quarterly GST instalment 30 days early may reduce the penalty and interest applicable on a previous late instalment remittance as a result of the offset mechanism in the legislation.
Section 237 sets out the rules relating to the payment of quarterly instalments by a registrant who has opted for annual filing. Subsection 237(1) specifies that instalments will be due within one month after the end of each fiscal quarter in the reporting period.
Subsection 280(2) imposes penalty and interest charges where a person has failed to pay all of an instalment of GST/HST under subsection 237(1). For instalment payments due before April 1, 2007, the prescribed rate of interest under the Interest Rate (Excise Tax Act) Regulations for unpaid instalments of tax is determined by reference to the rate charged on 90-day Treasury Bills, as adjusted quarterly, and rounded to the nearest one-tenth of a percentage point. In addition to interest, a penalty of 6 per cent per year, compounded daily, on the unpaid amount is imposed.
Effective April 1, 2007, subsection 280(2) was amended. The new prescribed rate of interest is determined by reference to the rate charged on 90-day Treasury Bills, adjusted quarterly, rounded up to the nearest whole percentage point, and adding 4 per cent. The 6 per cent penalty has been removed.
If a person was required to pay an amount before April 1, 2007, but failed to pay by that day, the old interest rules and 6 per cent penalty apply. The new prescribed rate applies to instalments that become due March 2007.
Subsection 280(3) provides an offset mechanism that limits the total interest and penalty payable in respect of instalments. Interest and 6% penalty under subsection 280(2) are only payable to the extent that they exceed interest plus 6% calculated on overpaid or early instalments that became due prior to April 1, 2007. For instalment payments that became due after March 2007, interest at the new prescribed rate charged on late or unpaid instalments is only payable to the extent that it exceeds interest at that prescribed rate calculated on overpaid or early instalments.
This is similar to the offset mechanism provided with respect to instalments required under the Income Tax Act. Where the amount calculated on overpaid or early remitted instalments exceeds any penalty and interest payable or interest at the new prescribed rate payable, the excess is not refundable and may not be applied to any other debt. Subsection 280(3) was also amended in 2006, to reflect amended 280(2) regarding penalty and interest rates.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call Bhavesh Patel, Rulings Officer, directly at (613) 952-0419.
Yours truly,
Owen W. Newell
Manager
General Operations Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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