CRA notes that a resident who has been overcharged GST/HST by a NR supplier registered under the new digital economy measures can request the NR to issue a s. 232 refund
There is a general requirement under ETA s. 211.14(1) for a non-resident to register and charge GST/HST to unregistered recipients on most supplies of services or intangible personal property where a de minimis dollar threshold is exceeded. What if GST/HST is so collected in error (i.e., it was apparent that the recipient was registered)?
S. 211.17 indicates that the recipient is generally not allowed to claim an input tax credit, rebate, refund or remission in respect of any GST/HST that is required to be collected by a person that is registered under the above regime. However, CRA indicates that a number of avenues are available, of which the only one it mentions is that the recipient may approach the non-resident to seek a refund of the over-charged GST/HST, in which case the normal s. 232 refund rules would apply (i.e., presumably the non-resident would be entitled to what effectively is an offsetting ITC for the GST/HST refunded by it in the reporting period in which it issues a credit note to the resident registered recipient, assuming that the GST/HST indeed was not collectible because the recipient could evidence its registration).
CRA does not discuss whether the registered recipient could request a refund for tax paid in error under s. 261 if the non-resident refused to refund the tax. Note that the s. 211.17 prohibition applies to rebates etc. of tax which was required to be collected – so that a s. 261 rebate might not be available if the recipient indeed was registered - but failed at the time to provide satisfactory evidence of such registration to the non-resident. Also note that “satisfactory” means “satisfactory to the Minister,” so that there is potential ambiguity as to when the s. 211.17 prohibition will apply. This point also is not discussed.
Neal Armstrong. Summary of GST/HST Notice 322, Recovery of the GST/HST Under the Digital Economy Measures, April 2022 under ETA s. 211.17(2)(a)(i).