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This is in response to your E-mail of September 8, 1994, in which you request that we comment on the ability of individuals who make application for the Goods and Services Tax (GST) new housing rebate under section 256 of the Excise Tax Act (the "Act") to claim additional amounts on expenses incurred after the date of filing the rebate. We apologize for the delay in responding.
Scenario 1
After individuals file GST new housing rebate claims under section 256 of the Act, they often incur additional expenses in relation to the construction or substantial renovation of the house. When auditors subsequently review the claims, the individuals then wish to have these additional amounts included in the GST new housing rebate calculations. You have asked whether auditors would be legally correct in denying the additional amounts submitted after the filing of the rebate form.
Subsection 256(2) of the Act outlines both the requirements and the methods of calculating the GST new housing rebate where a particular individual constructs or substantially renovates, or engages another person to construct or substantially renovate for the particular individual, a single unit residential complex for use as the primary place of residence of the particular individual or a relative. Where paragraphs 256(2)(a) to (d) are satisfied, the particular individual will be eligible for the rebate.
Specifically, paragraph 256(2)(c) of the Act will be satisfied where:
... the particular individual has paid tax under Division II in respect of the supply by way of sale to the individual of the land that forms part of the complex or an interest therein or in respect of the supply to the individual of any improvement thereto (the total of which tax is referred to in this subsection as the "total tax paid by the particular individual") ...
(Note that this paragraph clearly states that the particular individual must have paid tax as opposed to tax payable.)
The phrase "total tax paid by the particular individual" is pertinent to both paragraphs 256(2)(e) and (f) of the Act. These paragraphs outline the formulae to calculate the GST new housing rebate under section 256.
Paragraph 256(2)(e) provides, where the fair market value of the house is less than $350,000, the rebate shall be equal to, "... the lesser of $8,750 and 36% of the total tax paid by the particular individual before an application for rebate is filed with the Minister ...".
Paragraph 256(2)(f) provides, where the fair market value is more than $350,000 and less than $450,000, the amount is determined by the formula A * ($450,000-B)/$100,000. For purposes of the formula, A is equal to, "... the lesser of $8,750 and 36% of the total tax paid by the particular individual before an application for rebate is filed with the Minister ... and B is the fair market value of the complex ...".
Based on the above paragraphs, the amount of GST new housing rebate an individual can make application for can only be calculated on amounts of "total tax paid by the particular individual" prior to filing the rebate with the Department. In our view, auditors would be technically correct in denying amounts for rebate calculated on GST paid after the filing of the GST new housing rebate application.
Scenario 2
There are situations where auditors have not accepted additional submitted amounts calculated on expenses incurred both before and/or after the initial filing of the GST new housing rebate claim. This has resulted in claimants requesting to have their filed GST new housing rebate applications cancelled so that they may reapply. This would allow the claimant to adjust the calculations to include the additional amounts.
Claimants can not request to have a GST new housing rebate application that has been filed in prescribed form and manner to be cancelled so that another application with respect to the same complex can be refiled. Section 262 of the Act sets out the application requirements in respect of rebates under Division VI of Part IX of the Act. Subsection 262(1) states that the contents and manner of filing applications for rebate are to be prescribed by regulation. Subsection 262(2) clearly states that, "Only one application may be made under this Division for a rebate with respect to any matter". Consequently, where a particular individual files a GST new housing rebate claim in prescribed form and manner, only one such claim may be filed by that particular individual in respect of the particular construction or substantial renovation. This provision is explained on page 3 of the Completion Guide and Form For: New Housing Rebate which contains the following paragraph:
You may only apply for the GST new housing rebate once, using one application form for each qualifying new or substantially renovated home you purchase or have constructed. Only one individual may apply for the rebate, even if there is more than one owner of a qualifying home.
Therefore, pursuant to subsection 262(2), auditors would be technically correct in denying a resubmitted GST new housing rebate application where a request was made by the particular individual to cancel the initial correctly filed claim for the expressed purpose of realizing a rebate amount of previously unclaimed amounts of GST paid.
General Comments
Based on the forgoing, the Act does not provide specific guidelines on submitting additional amounts to be considered for the GST new housing rebate or cancelling rebate applications filed. Nevertheless, it is our understanding that district audit groups are currently exercising discretion in the application of the aforementioned provisions. The formulation of reasonable discretionary measures in the carrying out of the audit function when reviewing filed GST new housing rebate claims is an audit function. We would be pleased, however, to review such discretionary guidelines.
If we can be of further assistance, please do not hesitate to contact John Bain at 954-8852.
Stan Farber
Manager, Tax Policy
Real Property
Policy and Legislation
| c.c.: |
Stan Farber
John Bain |
File No.: 11870-4-2, 11950-1
c.n.: 898 (CPQ/JB)
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