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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 135636
September 26, 2011
Dear [Client]:
Subject:
GST/HST RULING
Refund of GST on manufacturer's incentive payment [on a vehicle]
Thank you for your letter of April 29, 2011, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the incentive payment you received from [...] in respect of your [...] [vehicle].
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories. As the matter about which you are inquiring does not concern the HST, we will address only the GST implications in this ruling.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
We understand the following:
1. On [mm/dd/yyyy], you purchased a vehicle from [...] (the "Dealer"), a GST/HST registrant automobile dealership located in [...] [City 1, Province X];
2. At that time, the Dealer issued a purchase and sale agreement to you for the vehicle's purchase price of $[...]. You paid $[...] in GST to the Dealer in respect of the consideration paid for the vehicle;
3. You also paid an amount of [...] ("[...] [Province Y - Provincial Tax]") in respect of the purchase of the vehicle;
4. You are not a GST/HST registrant and you purchased the vehicle for personal use and enjoyment. You have not claimed an input tax credit in respect of the GST that you paid on the purchase of the vehicle;
5. The vehicle was manufactured by [...] (the "Manufacturer");
6. After purchasing the vehicle, you learned that the Manufacturer was providing significant incentive payments to U.S. customers purchasing the same vehicle as yours;
7. When you brought this information to the attention of the Manufacturer, you received a letter from the Manufacturer enclosing a cheque for $[...]. The Manufacturer's letter explains that this "goodwill adjustment" is equal to the value of the incentives that were available on other [...] models at the time of your purchase; and
8. The Manufacturer's letter makes no mention of GST or [Province Y - Provincial Tax].
Ruling Requested
You would like to know the following:
1. Are you entitled to a refund of GST in respect of the incentive payment; and
2. Are you entitled to a refund of [Province Y - Provincial Tax] in respect of the incentive payment?
Ruling Given
Based on the facts set out above, we rule that
1. You are not entitled to a refund of GST in respect of the incentive payment; and
2. We are unable to give a ruling on whether you are entitled to a refund of [Province Y - Provincial Tax] in respect of the incentive payment. For information about whether a refund or rebate of [Province Y - Provincial Tax] is available, we suggest that you contact [...].
Explanation
The rules in section 232 of the ETA apply to a reduction in consideration permitting a supplier to make an adjustment, refund or credit of GST where consideration for a taxable supply is reduced by the supplier at some time after the tax has been charged or collected. As the Dealer has not adjusted the consideration paid for the supply of the vehicle, you are not entitled to a refund of GST under this provision.
Furthermore, there is no provision in the ETA which allows for a GST refund in circumstances where a manufacturer pays a rebate to the recipient of a supply of property or a service. Where a recipient of a supply receives a rebate from a manufacturer, the recipient of the supply continues to pay tax on the full purchase price.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-957-8221. 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,
Kathryn Sigetich
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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