Dear XXXXX
This letter is in response to your inquiry dated August 5, 1994 regarding a proposed assessment emanating from a recent GST audit performed by the XXXXX[.]
I understand that you have had discussions with the XXXXX on behalf of your client, XXXXX concerning the waiver of penalty and interest in "wash transaction" situations. Further to these discussions, you are requesting that we provide you with our comments with respect to the discretion that is available which, in effect, minimizes a person's liability for penalty and interest.
As you are aware, the XXXXX[.] Therefore, I will limit my comments to confirming the application of the specific sections that you mentioned in your letter.
Subsection 281(1) of the Excise Tax Act (the ETA) provides, in part, the Minister with the discretion to extend in writing, at any time, the due date for filing a GST return. As indicated in your letter, such an extension provides that penalty payable under section 280 of the ETA is only payable from the expiration of the time so extended. However, interest payable pursuant to section 280 of the ETA remains payable as if the time had not been extended.
Pursuant to subsection 296(2) of the ETA the Minister may, in assessing the net tax of a person for a reporting period, take into account any unclaimed input tax credits (ITCs) for the reporting period being assessed. Where the Minister exercises such discretion and an overpayment of net tax results, interest will be payable beginning on the day that is twenty-one days after the later of:
i) the day the return for the reporting period was required to be filed, and
ii) the day the return for the reporting period was filed.
Interest will be payable from that time until the day a refund is made to the person or the day the amount is applied against any net tax remittable by the person for any other reporting period for which a return has been filed before the date the notice of assessment is issued.
The decision to assess net tax, penalty and interest in any particular case is a matter which falls under the responsibility of the local Excise/GST district office XXXXX. The waiver or cancellation of penalty and interest is an exceptional matter that is also considered locally, on a case by case basis, in certain situations that generally involve extraordinary circumstances.
With respect to the proposed assessment, XXXXX will ascertain whether the exercise of such discretion is appropriate based on the facts and circumstances of the particular case. Revenue Canada has not instructed district offices or XXXXX to automatically waive or cancel penalty and interest or to automatically grant an unclaimed input tax credit to a recipient in making an assessment in any given situation. It should be noted that the legislation provides registrants with a four year time period for claiming ITCs.
I trust that my comments will be helpful and that a response will be forthcoming XXXXX in regard to your representations made to XXXXX on August 4, 1994.
Sincerely,
W. McCloskey
Director General Policy and Legislation
XXXXX
| c.c.: |
H.L. Jones
D. Caron
M. Boivin
XXXXX |
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