8 November 1995 GST/HST Interpretation 11695-16 - Adjustments to GST Returns

                                                                        Telephone: (613) 954-8585
Fax: (613) 990-3602
File 11695-16(MRB)

This is further to a telephone conversation between XXXXX and Marcel Boivin of my staff held on November 1, 1995 concerning the above referenced GST registrant.

As indicated during that conversation, XXXXX provided us with a copy of letter to you dated October 12, 1995. It is our understanding that XXXXX office is preparing a response for your signature to address XXXXX concerns.

Although the policy provides that GST returns will not be adjusted to account for unclaimed input tax credits (ITCs) that do not offset an increase in tax liability, it is our view that the Department may wish to exercise discretion pursuant to subsection 296(2) of the Excise Tax Act[.]

Given that Policy P-149 "Administrative Policy Regarding Adjustments to the GST Return" was in place prior to April 1995, the client should have been advised at that time to claim the ITCs in the next reporting period as opposed to advising the client five months later. Had the client been advised in May 1995 to claim the ITCs in the next reporting period, the client could have claimed the ITCs in the return filed for the period of April 1 to June 30 1995.

The policy which was approved in April 1994 does provide for administrative flexibility to assess or reassess returns to allow for previously unclaimed ITCs. In our view, an undue delay on the part of the Department in advising a client that they should claim the ITCs in their next reporting period is an appropriate circumstance in which discretion should be exercised. As such, it would appear that discretion should be exercised to allow the ITCs in the reporting period of April 1 to June 30[,] 1995. This is the first reporting period in which the registrant could have claimed the ITCs had he been advised of the policy in a timely manner.

It is our understanding that Audit has recommended that, in accordance with the policy, the client be advised to claim the ITCs in his next return which is due in January 1996. Subsequent to our conversation with XXXXX it is expected that discretion will be exercised to allow the ITCs in the April to June 1995 reporting period as a result of the undue delay in advising the client of the policy. This is subject to a review of the facts of the situation as outlined in XXXXX letter.

For ease of reference we have enclosed a copy of the letter from XXXXX and our reply to her indicating that you would be providing her with the response.

Should you require information with respect to the Department's policy for making adjustment to previously filed GST returns, please contact Mr. Dave Caron, Manager, Administration and Enforcement Provisions, at 952-0301 or Mr. Marcel Boivin at (613) 954-2488.

H.L. Jones
Director
General Applications Division
GST Rulings and Interpretations
GEN(2549)

Attachments

            D. Caron
M. Boivin