27 August 2001 GST/HST Interpretation 35815 - Rebate Entitlements

Dear XXXXX:

This letter is in response to your facsimile message of May 2, 2001, to XXXXX XXXXX Tax Services Office concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the rebate entitlements of the XXXXX XXXXX (the "City"). I have been asked to respond to your enquiry.

Background Information

The City received a number of credit notes from various suppliers (The vast majority of these credit notes were issued by one supplier, XXXXX) that indicated, amongst other things, a refund or adjustment of the GST. The City, with a year end of December 31, files returns and claims its rebates on a quarterly basis. On receipt of the credit notes, the City reduced its subsequent rebate claims to reflect the GST it recovered by way of refund or adjustment where a rebate had previously been claimed with respect to the original invoice. The original invoices covered the period from XXXXX to XXXXX. The City took the credit notes into account when filing returns prior to the reporting period ending XXXXX.

The tax consultant representing the City is of the view that these rebate "reductions" were unnecessary. Consequently, the City has requested an "adjustment" to its rebate claim for the period ending XXXXX, in the amount of XXXXX. It is our understanding that the rebate application for the period ending XXXXX, was received on XXXXX.

Interpretation Requested

You would like to know whether or not the City is entitled to make an adjustment to its rebate claim for the period ending XXXXX, to recover amounts adjusted on previous rebate claims as a result of having received credit notes from its various suppliers identifying, amongst other things, a refund or adjustment of the GST.

Interpretation Given

It is our view that the City would not be entitled to make an adjustment to its rebate claim for the period ending XXXXX, to recover amounts adjusted on prior rebate claims as a result of having received credit notes from its various suppliers identifying, amongst other things, a refund or adjustment of the GST.

Paragraph 263(d) of the ETA provides, in part, that a rebate of an amount under section 259 of the ETA shall not be paid or granted to a person to the extent that it can reasonably be regarded that a credit note referred to in subsection 232(3) of the ETA has been received by the person (or a debit note has been issued by the person), for an adjustment, refund or credit that includes the amount. In the case at hand, the City did receive credit notes from its suppliers that indicated a refund or adjustment of the GST.

For the foregoing reason, we conclude that the City would not be entitled to claim a rebate, or request an adjustment to the rebate in question, after December 10, 1998, to recover amounts previously "adjusted" for on earlier rebate claims as a result of having received credit notes from its suppliers since the coming into force date of the relevant amendments to section 263 of the ETA was December 10, 1998.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-4019.

Yours truly,

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

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