CRA finds that a rescission fee paid to the vendor of a B.C. residential property generally is not subject to GST

S. 42(1) of the Property Law Act (B.C.) provides that a purchaser of residential real property generally may rescind the contract of purchase and sale for the property by serving written notice of rescission on the seller within three days after the date that the acceptance of the offer was signed. S. 6 requires the rescinding purchaser to promptly pay to the seller an amount equal to 0.25% of the purchase price.

CRA indicated that the fee would not be subject to GST under ETA s. 182 except where the sale had been for a taxable supply of real property by a registrant (e.g., a sale by a builder). It also reiterated its position that generally damages payments not within s. 182 are not consideration for taxable supplies.

Neal Armstrong. Summary of 18 April 2023 GST/HST Interpretation 245056 under ETA s. 182(1).