20 June 2001 General Information Letter 35548 - GENERAL INFORMATION LETTER [Explanation of Audit Provisions]

Dear XXXXX:

Thank you for your letter of April 2, 2001 requesting an explanation of the audit provisions of the Excise Tax Act (ETA).

The administration and enforcement of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) is based on voluntary compliance by registrants and taxpayers. However, to ensure that registrants and taxpayers are properly collecting and remitting or paying the required amount of tax, the ETA gives the Canada Customs and Revenue Agency (CCRA) broad audit powers.

A registrant or other person required to file a return for a reporting period may be audited and assessed for the net tax payable or remittable for the period within four years after the day on which the return for the period was required to be filed. If the return is not filed on time, the assessment may be issued within four years after the day on which the return was actually filed. The limitation periods on assessments may be set aside in cases of fraud or misrepresentation attributable to neglect, carelessness, or willful default.

During an audit all documents relevant to the period under review are examined at the taxpayer's premises for the purpose of determining the liability of the person under audit or that person's entitlement to a refund or rebate. In assessing a person's net tax for a reporting period, the Minister is required to take into account any unclaimed rebate or refund and to apply an overpayment of net tax against net tax liability.

When an audit is completed, the legislation requires the Minister to send a notice of assessment to the person. Generally, a notice of assessment sets out the following information:

•   the amount of tax payable or remittable by the person assessed or the amount of any refund or rebate owing to the person;

•   a brief explanation of the assessment; and

•   the period within which an objection to the assessment may be filed.

An assessment is final and binding on the person assessed unless a notice of objection is filed within 90 after the notice of assessment is sent to the person.

For your information, I have enclosed a copy of GST Memorandum 500-3-1: Tax Audits.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-7947.

Yours truly,

Darlene Wladyka
Governments Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate