We have recently seen many clients make improper “corrections” or “amendments” to previously-filed GST Returns, which ultimately causes even more problems, and leads to unrecoverable GST!

In fact, there is no legislative basis for filing a corrected or amended GST Return.  We regularly see clients who chose to deal with errors by making “after-the-fact” changes to “GST collectible” or “GST credits claimed” in later periods – perhaps believing that if net tax was under-reported in January, it can be fixed by adding extra “net tax” to July!

While errors on GST Returns are a fact of life, the way that these mistakes are corrected can cause bigger problems (think: lost money)!

How GST is Supposed to be Reported †

Generally, a GST registrant is required to file a periodic GST Return (monthly, quarterly, or sometimes annually).  The registrant is required to use that Return to report GST collected or collectible on Line 105, and GST credits on Line 108.  While electronic returns have done away with some line numbers, this remains the basic structure.

For Line 105 “collectibles”, only GST that is collectible in that reporting period should be reported (i.e., the registrant has invoiced the recipient for the supply in that reporting period OR has collected GST in respect of the supply in that reporting period without having previously invoiced for it).  Some exceptions apply, for example, where the supply is effectively complete in one month, and no invoice is issued by the end of the next month.  In that case, special rules may deem the GST to be collectible in that next month: see ETA 168(3).

For Line 108 “credits”, a registrant engaged in commercial activities may claim Input Tax Credits (“ITCs”) on Line 108 of their GST Return for a particular reporting period provided they have: (1) received an invoice charging GST in the particular period (or paid GST to a supplier without having been invoiced for it); and (2) before filing the return in which the ITCs are claimed, the registrant has obtained all of the information needed to satisfy ETA 169(4) and prescribed by the Input Tax Credit Information (GST/HST) Regulations (SOR/91-45).   

In contrast to GST collected, ITCs do not have to be claimed in the period in which they originate and can generally be claimed in future reporting periods, up to a maximum of 4 years for a registrant fully engaged in commercial activity.  Accordingly, it is important to keep track of which ITCs have been claimed in which period, to ensure no claims are missed and to prevent double-claiming.

†   There are many special rules, so seek professional advice and do not rely on anything written here!  There are also many other possible credits to reduce “net tax”:  see the Credit Note process provided for in ETA 232, for an example. 

Correcting or Amending GST Returns

Where GST has not been properly reported in a particular reporting period (e.g., “GST collectible” is reported as too high or too low, or “credits” are claimed in excess of what was permitted), a question arises as to how to properly deal with that.  There are potentially different options – not all are permitted by legislation, although some are seemingly allowed by the Canada Revenue Agency (“CRA”).

A major challenge is navigating the different GST limitation periods that could apply.   For example, a two-year time limit exists for dealing with “over-payments” of GST (e.g., over-reporting and over-remitting GST collectible in a particular reporting period).   However, totally different time limits apply for claiming previously unclaimed ITCs (i.e., sometimes four years, sometimes two years, and sometimes only in the month after being billed for the GST).  Unfortunately, many clients reach out for professional assistance only after these have expired!

Another issue involves the advisability of the CRA’s “Voluntary Disclosure Program” – which can offer relief (e.g., full or partial relief of interest and penalties) – but may not always be appropriate.

The complexity of dealing with multiple types of errors over many reporting periods usually requires specialized legal assistance — which often has the upside of maximizing GST recovered! 

Do you require assistance in this area?  If so, please click here.

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