CRA confirms that Ontario debt retirement charges on electricity bills were subject to the ITC recapture rules
In Ontario, a person’s electricity bill can include a debt retirement charge (DRC) (payable to the Ontario Electricity Financial Corporation (OEFC) to help pay off the remaining debt from the former Ontario Hydro), and the global adjustment (GA) fee (paid to the Independent Electricity System Operator (IESO) to supplement infrastructure development.) During the relevant transitional years, ETA s. 236.01(2) required a large business to make an addition to its net tax of the prescribed percentages of its “specified provincial input tax credits,” which was defined in s. 236.01(2) as the portion of its ITCs in respect of a specified property or service (including electricity) “that is attributable to tax under subsection 165(2)” in respect of the acquisition of the specified supply. In other words, a portion of the provincial portion of the ITCs claimed for Ontario electricity purchases was recaptured.
CRA confirmed that the Ontario ITCs claimed for the HST on the DRC and GA fees were included in these recapture provisions.
Neal Armstrong. Summary of 15 March 2022 GST/HST Interpretation 191075 under s. 236.01(2).