Memorandum 8-1 [8.1] "General Eligibility Rules" 10 May 2005

27. Where property or a service is consumed or used partly in the course of a person's commercial activities and partly in its non-commercial activities (less than 90%, but more than 10% in its commercial activities), the person must apportion the GST/HST for the property or service between these two activities. Specifically, the person may be eligible to claim an ITC for the portion of the GST/HST paid or payable for the property or service that relates to its consumption or use in its commercial activities as long as all the other ITC criteria are satisfied. As noted below, this apportionment is based on the extent to which the property or service is used to make taxable supplies for consideration (which in this context does not include nominal consideration). ...

34. The rule regarding the purpose of making taxable supplies in subsections 141.01(2) and 141.01(3) is identical except that the former applies to intended consumption and use and the latter applies to actual consumption and use. The rule in subsection 141.01(3) is pertinent to those provisions (e.g., change-in-use rules for capital property) that depend on whether, and to what extent, properties and services are, at any particular time, consumed or used in commercial activities.

Claim independent of s. 225(4)(a) limitations

87. Where the supplier fails to charge tax to a person (including a specified person) before the end of the last reporting period of the person that ends within four years after the end of the particular reporting period in which the tax became payable, the person may be eligible to claim an ITC in the return for the reporting period in which the tax is paid by the person, provided that return is filed by its due date. To be eligible to claim the ITC, the supplier must have disclosed in writing to the person that the Minister has assessed the supplier for that tax and that the person must have paid the tax to the supplier after the end of the last reporting period and before the ITC is claimed by the person.

Implicit application of s. 296(2.1) where tax incorrectly charged and claimed as ITC

60. Where a person pays an amount as tax, or on account of tax, in error (e.g., an amount described as GST/HST was paid on an exempt supply), the amount is not tax that was payable under the Act. Accordingly, the person is not strictly eligible to claim an ITC for that amount, but should recover the amount paid in error from the supplier. Failing that, the person may claim a rebate under section 261 of the Act for tax paid in error by using form GST189, General Application for Rebate of Goods and Services Tax (GST)/Harmonized Sales Tax (HST). However, in practice, if a person claims an ITC in respect of an amount paid in error (which frequently occurs, given that the registrant does not immediately realize upon payment that an overpayment has been made), the CRA will offset this amount at the time of a net tax assessment by the amount of the rebate of the excess GST/HST to which the person would otherwise have been entitled, without any penalty and interest consequences.

February 28, 2006 is within 4 years of February 28, 2002

82. For a person, other than a specified person, an ITC that arises in a particular reporting period of the person must be claimed in a return for that reporting period or a subsequent reporting period, filed by the due date of the return for the person’s last reporting period that ends within four years after the end of the particular reporting period.

Example

A registrant that is not a specified person files monthly GST/HST returns on a calendar basis. On February 15, 2002, the person acquires taxable property for use exclusively in its commercial activities. Since the end of the particular reporting period is February 28, 2002, the ITC for the GST/HST paid or payable on the property must be claimed in a return for a reporting period that ends no later than February 28, 2006, and filed by the due date of the return for that last reporting period, March 31, 2006.