15 June 1999 GST/HST Ruling HQR0001731 - Limitation Period for Making a Refund or Adjustment of GST/HST Charged in Error

Dear XXXXX

Thank you for your letter of March 25, 1999, concerning the limitation period for making a refund or adjustment of Goods and Services Tax (GST)/Harmonized Sales Tax (HST) charged in error by the XXXXX[.]

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX (a charity) is a GST/HST registrant.

2[.] XXXXX in error charged GST to its tenant on an exempt supply of a lease of real property.

3. The amount charged in error in respect of the previous four years was credited to XXXXX tenant, and the amount credited was deducted from XXXXX net tax on its GST/HST return.

Ruling Requested

Is it possible for XXXXX to credit its tenant for amounts charged in error prior to the four years already credited (as far back as the inception of the GST), and to deduct the amount credited from its net tax?

Ruling Given

Based on the facts set out above and subject to the following paragraph, we rule that XXXXX may credit or refund the tax collected in error anytime within four years after the tax was charged in error, but not beyond that four year period. As well, since XXXXX would not be entitled to credit or refund any amount beyond the four year limitation, it could not claim a deduction from net tax beyond that period.

With respect to tax charged in error after June 1996 XXXXX has only two years after the day the amount was charged in error to refund or credit such tax to its customers. If the amount was charged in error by XXXXX but was not collected, XXXXX may simply adjust the amount of tax charged within the two year limitation period. However, for amounts XXXXX may have charged or collected before July 1996, the limitation period for refunding or crediting the tax, as well as the corresponding deduction from net tax, is four years provided such amounts were refunded, credited or adjusted before July 1998. Otherwise the two year limitation period applies.

On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%. If you require additional information regarding the application of the HST, please contact the undersigned.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Subsection 232(1) authorizes a registered supplier that has collected tax in error, to refund or credit the amount to the recipient and to deduct the amount refunded or credited from the suppliers net tax. As described above, this provision has been amended to reduce the limitation period for making the refund, credit or adjustment from four to two years.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0420 .

Yours truly,

Lorrie Grannary
Charities and Non-Profit Organizations Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate