1 March 1996 GST/HST Interpretation 11650-2 - Approval and Acceptance of Annual Blended Rates for the Purposes of Claiming Input Tax Credits (ITC's) Under the Excise Tax Act (the Act)

                                                                        File #: 11650-2(on)

                                                                        c.n. 2486(GEN)

                                                                        s. 169 & 141.01

Dear Sir:

I refer to your letter of June 8, 1995, requesting the approval and acceptance of annual blended rates for the purposes of claiming input tax credits (ITC's) under the Excise Tax Act (the Act). We regret the delay in our reply.

Pursuant to subsection 169(1) of the Act, the general rule for claiming ITC's, a registrant is entitled to claim ITC's for GST incurred on property or a service to the extent to which the registrant acquired or imported the property or service for consumption, use or supply in the course of commercial activities of the registrant. Under paragraph 141.01(2)(a) of the Act, a person who acquires or imports property or a service for the purposes of making taxable supplies in the course of an endeavour of the person, is deemed to have acquired or imported the property or service for consumption or use in the course of commercial activities of the person. Subsection 141.01(5) addresses the method of determining the extent to which property or service is acquired, imported, consumed and used by the person for the purposes of making taxable supplies or for other purposes pursuant to the provisions in subsection 141.01. It requires that the person use a method that is fair and reasonable, and used consistently throughout the year.

Your letter poses two questions: whether the method you have proposed is acceptable on the basis of the provisions described above, and whether the "blended" rates you have determined are a reasonable and accurate application of that method.

Resolving both of these questions will require an examination of your accounting methods and records, including questions concerning the worksheets you have submitted. Since such a review falls under the responsibility of the district office, we have referred your request to the XXXXX Tax Services Office at XXXXX. Please refer to XXXXX, Manager of Client Services, at XXXXX[.]

Should you have any questions, please contact Ms. Joanne Houlahan, Manager, Public Service Bodies Unit at 954-7945 or Mr. Owen Newell, Policy Officer, Municipalities at 954-4280.

Yours truly,

J.A. Venne
Director
Special Sectors
GST Rulings and Interpretations

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