18 September 2000 General Information Letter 32665 - GENERAL INFORMATION LETTER Tax Collected in Error

Dear XXXXX:

Thank you for your letter requesting information on what action can be taken where the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) was collected from customers XXXXX (the "supplier") on supplies which were subsequently ruled to be exempt.

Subsection 232(1) of the Excise Tax Act (ETA) provides that where a person has collected an excess amount of tax, it may refund or credit the excess amount to its customer. A registered supplier has up to two years from the end of the reporting period in which the excess amount was charged or collected to make the refund or adjustment. Where the supplier chooses to take this action, then pursuant to subsection 232(3) of the ETA, the supplier must, within a reasonable time, issue a credit note to the recipient for the amount of the refund or credit. The credit note must contain the information required pursuant to the Credit Note and Debit Note Information (GST/HST) Regulations. Generally, this will include the following information:

1. a statement that the document is a credit note;

2. the supplier's name (or business name) and registration number;

3. the recipient's name (or business name);

4. the date on which the note is issued;

5. a brief description of the items;

6. the date of any invoice concerning the credit or refund; and

7. the amount of the refund or credit of tax for which the note is issued.

If the amount refunded or credited has been included in determining the supplier's net tax for the reporting period in which the credit note is issued, or for a previous reporting period, the supplier may deduct that amount in determining its net tax for the reporting period in which it issued the credit note. If you choose to refund the tax collected in error, the appropriate Treasury Board publication Policy on the Application of the Goods and Services Tax and the Harmonized Tax in the Departments and Agencies of the Government of Canada, dated December 12, 1997, should be consulted. If your department is FIS compliant, please refer to the revised policy dated April 21, 2000.

Alternatively, should you choose not to refund or credit the amounts collected as tax in error, the person from whom tax was collected may apply for a rebate under section 261 of the ETA. Form GST189, General Application for Rebate of Goods and Services Tax (GST)/Harmonized Sales Tax (HST) is used to apply for this rebate. The time limit to apply for such a rebate is two years after the day the amount was paid by the person.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0370.

Yours truly,

Brent Fleming
Governments Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate