28 May 1996 GST/HST Interpretation 11675-1 - Interest and Penalty - Proposed Amendments

Dear XXXXX:

I refer to your facsimile transmission of May 6, 1996, regarding the manner in which interest and penalty will apply under the Excise Tax Act (ETA) if the proposed amendment set out in clause 117 of the Notice of Ways and Means Motion of April 23, 1996, is enacted by Parliament.

As you have indicated, the proposed amendment to section 28 of Part VI of Schedule V of Part IX of the ETA set out in clause 117, will result in XXXXX members of your association having to charge GST on XXXXX to the municipality. I would like to specify that the proposed amendment would apply to supplies for which consideration becomes due, or is paid without having become due, after April 23, 1996.

As explained in your submission, some of your members are choosing to wait to implement the proposed changes until such time as they are passed and have expressed concern with respect to interest and penalty charges. It is your understanding that no penalty and interest charges shall apply until such time as the proposed amendments are passed and you have requested confirmation of this in writing.

The Department will not make assessments based on proposed amendments until such time as those amendments are enacted. However, because proposed amendments apply retroactively once they are enacted, persons are encouraged to comply with proposed amendments as of their effective date. In response to your enquiry, when a proposed amendment is enacted, subsection 124(3) of the ETA requires interest to be calculated retroactively on any resulting amount that is payable or remittable by a person as if the amendment had been enacted before its effective date. This subsection also requires the retroactive calculation of interest on amounts becoming payable by the Department as a result of a retroactive amendment being enacted. Although interest applies retroactively, subsection 124(4) of the ETA provides that penalty will not be applied retroactively when a proposed amendment is enacted.

If and when the proposed change to section 28 of Part VI of Schedule V is enacted, your "para-municipal" members would be retroactively liable for the collection of GST on supplies of electricity to the municipality for which consideration became due, or was paid without having become due, after April 23, 1996. Interest would apply retroactively to any net tax that has not been remitted by those members as a result of not having charged tax on the supplies of electricity, while penalty would begin to apply to the unremitted net tax from the date of enactment of the amendment.

It should be noted that any amount collected as or on account of GST must be included in the net tax of a person for the reporting period during which the amount was collected. Any delay in the remittance of such amounts will result in the application of interest and penalty.

Should you have any questions, please contact Dave Caron, Manager, Administration and Enforcement Provisions at (613) 952-0301 or Patrick McKinnon at (613) 952-8813.

Yours truly,

H.L. Jones
Director
General Applications
GST Rulings and Interpretations

GAD #2960(INT)

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