Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 187770
Business Number: […]
Dear [Client]:
Subject: GST/HST INTERPRETATION
Eligibility to claim input tax credits
Thank you for your fax of October 31, 2017, concerning your company’s eligibility to claim input tax credits (ITCs) for the goods and services tax/harmonized sales tax (GST/HST) payable to one of its suppliers. We apologize for the delay in our response.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We understand that […] ([…][the Company]) is a Canadian corporation located in […], whose principal business involves the purchase of scrap gold (for example, used jewellery) that it subsequently refines into gold bars and coins that are at least 99.5% pure. [the Company] typically then sells these gold bars and coins to third parties, such as jewellers.
As a GST/HST registrant, [the Company] claims ITCs in its GST/HST returns for all or part of the GST/HST payable on its purchases of scrap gold and other property and services that are to be consumed, used, or supplied in the course of its commercial activities. [The Company] files its returns on a monthly basis, with a fiscal year end of [mm/dd].
[The Company] purchases its scrap gold from various sources. One of its GST/HST registrant suppliers (the Supplier) failed to charge the HST as required on its supplies of scrap gold made to [the Company] between [mm/yyyy] and [mm/yyyy]. The Supplier has subsequently been assessed by the Canada Revenue Agency (the CRA) for the tax it was required to collect from [the Company] each month during that time period. In [mm/yyyy], the Supplier issued two invoices to [the Company] requesting payment of the total amount of HST that was payable on those supplies, indicating on the invoices that it had been assessed for that tax by the CRA. It is our understanding that as of the date you submitted your fax to our office, [the Company] had not yet paid any of the outstanding HST to the Supplier.
You are aware that a GST/HST registrant generally must claim an ITC within a specific period of time based on when the applicable purchase was made. As a result, you are concerned that the usual time period may have expired in the case of at least some of the HST that [the Company] must now pay to the Supplier. However, you understand there are special rules in paragraph 225(4)(c) that may allow [the Company] to claim ITCs in these circumstances.
RULING REQUESTED
Is [the Company] eligible to claim ITCs for the HST payable to the Supplier in respect of the Supplier’s supplies of scrap gold made to [the Company] between [mm/yyyy] and [mm/yyyy]?
As noted in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, we will not issue a ruling when it would be inappropriate to do so. Since the CRA’s Audit Division is currently in the process of reviewing [the Company]’s GST/HST returns, we don’t consider that it would be appropriate for us to issue a ruling at this time. Instead, we have provided the following interpretation of the relevant provisions of the legislation, which is a general explanation of how those provisions would apply to the fact situation provided in your October 31 fax.
INTERPRETATION GIVEN
In general, subsection 169(1) allows a GST/HST registrant to claim an ITC for all or part of the tax that it pays or owes on its purchases of property or services to be consumed, used, or supplied in the course of its commercial activities. A person’s eligibility to claim an ITC is subject, in part, to certain documentary requirements (please see GST/HST Memorandum 8.4, Documentary Requirements) and the rules set out in subsection 225(4) requiring that the ITC be claimed within a specific period of time.
Paragraph 225(4)(a) provides the usual time limit for a “specified person” to claim an ITC, while the general rule for other registrants is found in paragraph 225(4)(b). A “specified person” is defined in paragraph 225(4.1) to include a “listed financial institution” described in any of subparagraphs 149(1)(a)(i) to (x). According to subparagraph 149(1)(a)(iii), a person whose principal business is as a trader or dealer in financial instruments is a listed financial institution for GST/HST purposes.
The term “financial instrument” is defined in subsection 123(1) to include a “precious metal”, which, in turn, is defined for GST/HST purposes to include a gold bar, ingot, coin, or wafer that is refined to a purity level of at least 99.5%. Therefore, based on the information we have been provided, [the Company] would be a specified person for purposes of the ITC timing rules found in subsection 225(4).
Since [the Company] is a specified person, the first rule to consider when determining the time limit for it to claim an ITC for a particular reporting period is found in subparagraph 225(4)(a)(iii). Under this rule, a specified person is required to claim an ITC by the due date of its GST/HST return for its last reporting period that ends within two years after the end of the person’s fiscal year that includes the particular reporting period.
Note that in respect of your situation, the “particular reporting period” referred to in this provision is the reporting period in which the applicable tax first became payable by the recipient. Through the application of subsections 168(1) and 152(1), this is generally the reporting period in which the recipient was first invoiced by the supplier for the consideration payable on the relevant supply, despite the fact that it may not have been billed for the applicable GST/HST at that time.
For example, where [the Company] was invoiced in [mm/yyyy] (the latest of the periods in question) for a purchase of scrap gold from the Supplier, [mm/yyyy] would be the particular reporting period in respect of that supply, regardless of whether the Supplier charged [the Company] the HST at the time. In that case, the deadline under subparagraph 225(4)(a)(iii) for [the Company] to claim an ITC for the HST payable on that supply would have been [mm/dd/yyyy], the due date of its monthly GST/HST return for [mm/yyyy] (two years after the end of its [yyyy] fiscal year).
Therefore, based on the information available, the usual time limit for claiming ITCs in respect of all of [the Company]’s purchases of scrap gold from the Supplier made during the period in question had already expired by the time it was invoiced by the Supplier for the outstanding HST.
However, since [the Company] was not invoiced for the HST until after the end of the particular reporting period for each of the supplies of scrap gold made between [mm/yyyy] and [mm/yyyy], subparagraph 225(4)(a)(i) must be considered when determining the date by which [the Company] would have to claim the related ITC. According to this provision, the latest date for a specified person to claim an ITC is the earlier of
(A) the due date of the person’s GST/HST return for its last reporting period that ends within two years after the end of the person’s fiscal year in which the supplier charges the tax to the person, and
(B) the due date of the return for the last reporting period of the person that ends within four years after the end of the particular reporting period.
A further condition in this subparagraph for a person to be able to claim an ITC is that the person pays the tax owing to the supplier before claiming the ITC in a GST/HST return.
As [the Company] was charged the tax in [mm/yyyy], the date determined by clause (A) would be [mm/dd/yyyy], while the date determined by clause (B) for the latest of the reporting periods in question would be [mm/dd/yyyy]. Therefore, based on the information provided, [mm/dd/yyyy], would have been the due date for [the Company] to claim an ITC for the tax applicable to its purchases of scrap gold from the Supplier made in the latest of the relevant particular reporting periods. As [the Company] did not claim the ITCs by that date for any of the outstanding HST owed to the Supplier, it would no longer be eligible to claim the ITCs according to the time limit provided by subparagraph 225(4)(a)(i).
The final rule for determining the usual due date for a specified person to claim an ITC is found in subparagraph 225(4)(a)(ii). However, this provision applies in specific circumstances where an ITC was claimed by a person who was not entitled to claim it and, as such, it does not apply in [the Company]’s case.
When the time limits set out in paragraph 225(4)(a) for a specified person to claim an ITC have expired, the person may still be able to claim the ITC for a particular reporting period under the rules provided by paragraph 225(4)(c). This provision states that where
(i) the ITC is in respect of property or a service supplied to the person by a supplier who did not, before the end of the last reporting period of the person that ends within four years after the end of the particular reporting period, charge the tax in respect of the supply that became payable during the particular reporting period and the supplier discloses in writing that the Minister of National Revenue has assessed the supplier for that tax, and
(ii) the person pays that tax after the end of that last reporting period and before the ITC is claimed by the person,
the ITC must be claimed by the due date of the GST/HST return for the reporting period in which the person pays that tax.
In the case at hand, the Supplier charged tax on all the supplies it made to [the Company] from [mm/yyyy] to [mm/yyyy] on [mm/dd/yyyy], indicating on the invoice that it had been assessed by the CRA. For those supplies made between [mm/yyyy] and [mm/yyyy], this date was more than four years after the end of each of [the Company]’s relevant monthly reporting periods. Therefore, [the Company] would be eligible to claim ITCs in respect of the supplies made in those periods once it has paid the tax to the Supplier. For example, if [the Company] paid the Supplier the outstanding HST in November 2017, it would have to claim the ITCs by the due date of its GST/HST return for its November reporting period, which would have been December 31, 2017.
However, as the Supplier invoiced [the Company] for the outstanding HST on [mm/dd/yyyy], the four-year condition in subparagraph 225(4)(c)(i) would not be satisfied in respect of the Supplier’s sales of scrap gold made to [the Company] between [mm/yyyy] and [mm/yyyy]. Consequently, [the Company] would not be eligible to claim ITCs for the tax payable on those supplies under any of the timing rules found in subsection 225(4).
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call Graham Leflar, Rulings Officer, directly at 306-975-4733. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Catherine Séguin-Ouimet
Manager
General Operations Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
Email this Content