5 September 2002 GST/HST Interpretation 40484 - Drawbacks and Refunds

This is in reply to your e-mail dated XXXXX, in which you request our opinion on the availability of a drawback or a refund of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) in various scenarios that you have provided to us. We cannot make a decision on whether or not the claimants in the scenarios are eligible for a drawback or refund of tax, because we do not have all the necessary facts. However, we are pleased to provide you with the following interpretation.

The Customs Tariff allows a refund or drawback of all or a portion of duties under much broader conditions than what we permit under the Excise Tax Act (Act). The only somewhat similar provision in our Act is subsection 215.1(1).

Generally, the tax on imported goods is imposed under Division III of the Act. Subsection 215.1(1) of the Act permits a rebate of Division III tax on returned goods, which meet the following conditions:

•   person paid Division III tax upon importation of the goods

•   person acquired the goods on consignment, approval, sale-or-return basis or other similar terms

•   goods must be exported by the person for the purpose of returning them to the supplier

•   goods must not be used or consumed other than on a trial basis prior to exportation

•   the goods must not be damaged after their release and before they are exported

•   the goods must be exported within 60 days after their release, and

•   the person must apply within 2 years after the day the tax was paid, for a rebate of the tax on a prescribed form containing prescribed information.

A rebate is also available under subsections 215.1(2) and (3) of the Act in certain circumstances involving imported goods that are damaged, are of an inferior quality, are defective or are not according to order.

Section 263 of the Act provides that a person is not entitled to a rebate of an amount under various sections, including subsection 215.1(1), to the extent that it can reasonably be regarded that:

•   the amount has previously been rebated, refunded or remitted to the person;

•   the person has claimed or is entitled to claim an input tax credit (ITC) in respect of the amount;

•   the person has obtained or is entitled to obtain a rebate, refund or remission of the amount; or

•   a credit note 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.

For example, a non-resident person imports goods into Canada and pays Division III tax upon importation of the goods. The goods are intended for sale in Canada by the non-resident at a trade show or at an exhibition. Goods that are not sold in Canada will be exported by the non-resident and will be subject to Customs drawback.

Generally, a rebate of Division III tax paid on goods imported into Canada is available under the conditions outlined in sections 215.1 and 216 of the Act. Generally, subsection 216(6) of the Act provides for a rebate of excess Division III tax that, is determined to have been paid as a result of an appraisal, re-appraisal or further re-appraisal of the value of goods or a determination of the tax status of goods. In the above trade show example, there is no provision in the Act that would allow for a rebate of

Division III tax paid by the non-resident. Therefore, there is no refund or drawback of tax available/payable to the non-resident in these specific circumstances. A registrant may recover the tax paid upon importation by claiming an ITC. There is a similar example in the GST/HST Guide, Doing Business in Canada - GST/HST Information for Non-Residents, in the Questions and Answers section.

We would like to confirm that subsection 252(1) of the Act only allows for a rebate of Division II tax (i.e. the GST imposed on goods and services supplied in Canada) and does not provide for a rebate of the Division III tax imposed on imported goods. Specifically, the rebate under subsection 252(1) of the Act is generally available to a non-resident recipient with respect to the Division II tax paid on a supply to the person of tangible personal property delivered in Canada to the person, if the person exports the property within 60 days of delivery and the property is acquired for use primarily outside Canada.

We hope that this is helpful to determine the eligibility of the claimants. Should you have any further questions, please do not hesitate to contact me at (613) 952-4294.