8 February 2001 GST/HST Interpretation HQR32544 - GST/HST Overpaid at Time of Importation

Dear XXXXX:

Thank you for your letter to Ivan Bastasic of August 21, 2000 concerning the overpayment of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) on imported goods in various situations. These situations include where excess GST was paid due to overpaid duties, GST overpaid due to keypunch errors in the value for currency and GST on misevaluated (not sold) goods by shippers.

Interpretation Requested

Your understanding is that all GST being paid may be claimed as an input tax credit (ITC) under section 169(1) and sections 212 to 215 of the Excise Tax Act (the Act).

You request clarification from our Office on whether an ITC can be claimed, under the Act, for the GST paid in excess at the time of importation of goods in Canada or whether claiming a GST rebate by filing a GST 189 form is the only solution to recover for GST overpaid at the time of importation.

Interpretation Given

Generally, subsection 169(1) of the Act provides that where a registrant acquires or imports property or a service, the registrant is eligible to claim an ITC for the amount of GST payable in respect of the supply or importation, if the property or service is acquired or imported for consumption, use or supply exclusively in the course of the commercial activities of the registrant.

Generally, subsection 216(6) of the Act provides for a rebate to be paid to a person of an amount determined to have been paid as tax on imported goods as a result of an appraisal, re-appraisal or a further re-appraisal of the value of the goods or a determination of the tax status of the goods.

A registrant who pays an amount as tax in error on an importation of goods is not technically entitled to claim an ITC for that amount since an ITC may only be claimed for tax that is actually payable under the Act (i.e. not tax paid in error). However, if an ITC is in fact claimed in respect of an amount paid as tax in error, the amount of that unentitled ITC would have to be retroactively offset at the time of an audit by the amount of an unclaimed rebate that the registrant could have otherwise claimed in respect of the amount, with no penalty or interest consequences.

Therefore, in reply to your question, a registrant who imports goods may claim an ITC to recover an amount paid as tax in error on the importation if a rebate of that amount would have otherwise been available to the registrant. Provided that a rebate of the amount is not also claimed, no further action is required and there will be no penalty or interest consequences for having claimed the ITC.

For more information regarding the recovery of GST paid in error on imported goods, please see the rebate and refund procedures on page 15 of the guide entitled Doing Business in Canada - GST/HST Information for Non-residents, which is enclosed for you convenience.

We note that it is the customs broker's client on whose behalf the customs broker cleared the goods and paid the GST in error, and not the customs broker, who may claim an ITC, or is entitled to be paid a rebate, as the case may be, for the tax paid in error for the importation of the goods.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-4294.

Yours truly,

Francine Ménard
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate