20 October 2005 GST/HST Interpretation 64563 - Use of the election in section 156 of the ETA

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.

This is in response to your memorandum XXXXX in which you requested direction regarding the month in which a person ceasing to be a small supplier pursuant to subsection 148(1) of the Excise Tax Act (ETA) is required to register for the GST/HST.

Subsection 148(1) of the ETA provides that a person is a small supplier during any particular calendar quarter and the following month if the total value of the consideration for world-wide taxable supplies, including zero-rated supplies, made by the person (or an associate of the person at the beginning of the particular calendar quarter) that became due, or was paid without becoming due, in the previous four calendar quarters does not exceed $30,000 or, where the person is a public service body, $50,000.

There is an exception to this rule in subsection 148(2) of the ETA. Subsection 148(2) of the ETA provides that a person ceases to be a small supplier at any time in a calendar quarter if the total value of the consideration that becomes due, or is paid without becoming due, in that quarter for world-wide taxable supplies (other than consideration attributable to the sale of goodwill of a business, supplies of financial services, and supplies by way of sale of capital property) made by the person, or an associate of the person at the beginning of the calendar quarter, exceeds $30,000 or, if the person is a public service body, $50,000. The person ceases to be a small supplier immediately before the consideration becomes due or is paid for the particular taxable supply that puts the person over the $30,000 or $50,000 small supplier threshold.

Essentially, subsection 148(1) defines "small supplier" and subsection 148(2) provides an exception to that definition. Section 148 of the ETA does not provide rules for registration for GST/HST purposes.

You provided an example for subsection 148(1) as follows:

In this example, the person has exceeded the small supplier at some point in quarter 4. The person is a small supplier pursuant to subsection 148(1) of the ETA until the end of quarter 3 and, at that time, qualified as a small supplier throughout the calendar quarter and the first month immediately following the third calendar quarter (i.e., quarter 4 and the first month of quarter 5).

Paragraph 240(1)(a) of the ETA provides that every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is required to be registered for the GST/HST except where the person is a small supplier. Paragraph 240(2.1)(b) of the ETA requires a person who is not a small supplier to register for the GST/HST before the day that is thirty days after the day the person first makes a taxable supply in Canada otherwise than as a small supplier.

In your example the effective date of registration is that day in the second month of quarter 5 in which the person first makes a taxable supply otherwise than as a small supplier (pursuant to paragraph 240(1)(a)). The person must apply for registration before the day that is thirty days after it made its first taxable supply in Canada otherwise than as a small supplier (pursuant to paragraph 240(2.1)(b).

In example 2 in GST/HST Memoranda Series 2.2 Small Suppliers, the person has not exceeded the $30,000 threshold in the previous four calendar quarters. In accordance with subsection 148(1) of the ETA, the person will continue to be a small supplier until one month after the end of the fifth calendar quarter (unless the person makes taxable supplies in excess of $30,000 paid or becoming due in quarter five in which case subsection 148(2) would apply). As the person is still a small supplier, there is no requirement for the person to register under the provisions of section 240 of the ETA.

Example 3 in GST/HST Memoranda Series 2.2 is similar to the example you provided in your memorandum. As such, the same logic applies.

The statement quoted in your memorandum from the Guide General Information for GST/HST Registrants (2003), is correct. Again, the facts are similar to your example and example 3 in GST/HST Memoranda Series 2.2 and the same logic applies.

Should you have any further questions regarding this matter, please do not hesitate to contact me at (613) 954-7931.

2005/09/28 — RITS 53944 — Municipal Designation