4 August 2006 GST/HST Interpretation 81946 - Application of GST/HST to Cemetery Products and Services

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.

Dear XXXXX:

Thank you for your fax XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the appropriate tax rate to be charged on rebill invoices issued by XXXXX (the City).

All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.

Effective July 1, 2006, the rate of the GST has been reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST/HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For more information on the transitional rules for the reduction of the GST/HST rate, please refer to Reduction in the Rate of the GST/HST - Questions and Answers (http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html) on the CRA Web site.

In each of the following four scenarios, the City issued the original invoice for taxable supplies prior to July 1, 2006. After July 1, 2006, the City issued rebill invoices described XXXXX as completely new invoices that incorporate required corrections.

Scenario 1

The original invoice was sent to the wrong customer. The rebill invoice was sent to the correct customer.

Scenario 2

The customer was overcharged on the original invoice. The rebill invoice reflected an adjusted amount or quantity.

Scenario 3

The customer was undercharged on the original invoice. The rebill invoice reflected an adjusted amount or quantity.

Scenario 4

The original invoice was incorrect due to a clerical error. The rebill invoice reflects correct data.

Interpretation Requested

You would like to know whether GST should be charged at the rate of 6% or 7% on the rebill invoices described in the four scenarios above.

Interpretation Given

Under the provisions of subsection 168(1) of the ETA, tax is payable by the recipient of a taxable supply on the earlier of the day the consideration for the supply is paid and the day the consideration for the supply becomes due.

Subsection 152(1) of the ETA provides that the consideration (or a part thereof) for a taxable supply is deemed to become due on the earliest of

•   the earlier of the day the supplier first issues an invoice in respect of the supply for that consideration or part and the date of that invoice;

•   the day the supplier would have, but for an undue delay, issued an invoice in respect of the supply; and

•   the day the recipient is required to pay the consideration or part to the supplier pursuant to an agreement in writing.

Based on the information provided, the supplier first issued an invoice in respect of the supply prior to July 1, 2006 in all four scenarios. Therefore, the consideration in respect of the supply is deemed to become due prior to July 1, 2006 and the tax is payable by the recipient at the same time unless the recipient paid the consideration prior to that time. The rate of tax in effect prior to July 1, 2006 was 7%. As a result, the City should charge GST at the rate of 7% on the rebill invoices.

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, Goods and Services Tax Rulings, 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 me directly at (613) 954-7931.

Yours truly,

Anne Kratz
General Operations Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2006/08/23 — RITS 82131 — Application of GST/HST to [Granola Bars and Other Granola Products]