This guideline takes effect on July 1, 2010 and reflects GST and HST rates in place as of that date.
2.1 This guideline supports the Directive on the Application of the Goods and Services Tax/Harmonized Sales Tax (hereafter "the Directive").
2.2 Though this guideline elaborates on the Directive, it does not present new mandatory requirements; rather, it reflects existing obligations under an act, regulations, a policy, a directive, a standard or another authority.
Definitions to be used in the interpretation of this guideline can be found in the Directive on the Application of the Goods and Services Tax/Harmonized Sales Tax.
4.1 The federal government entity consists of all departments, which are registered for GST/HST purposes with the Canada Revenue Agency (CRA) as one registrant under Business Number 121491807RT0001. Each department that provides taxable services is to register with CRA as a separate reporting entity and request its own GST/HST account, which will contain the federal government entity's Business Number plus a unique four-digit RT extension.
4.2 The authority to add to, delete from or make any other amendment to the departmental reporting entities for GST/HST purposes has been delegated to departments by the Comptroller General of Canada:
Authority is hereby delegated to the deputy heads of all federal government departments, as the term is defined in the Financial Administration Act, to add to, delete from or make any other amendments to the Government of Canada reporting entities register for the purposes of sub-section 239(1) of the Excise Tax Act (ETA), as may be appropriate with respect to that portion of the Public Service for which the deputy head is responsible.
4.3 A department may choose to have more than one reporting entity if the following conditions are met:
4.4 A department must register a reporting entity with CRA for the GST/HST:
Also include a cover letter requesting the Team Leader to send notification when the application has been processed.
4.5 Departments must review their requirement to maintain multiple reporting entities on an annual basis. When a reporting entity no longer provides taxable supplies or ceases to exist, the entity's authorization to file separate GST/HST returns must be revoked using Form GST 10, "Application or Revocation of the Authorization to File Separate GST/HST Returns and Rebate Applications for Branches or Divisions."
When a department provides taxable supplies, it is responsible for submitting monthly returns of GST/HST collected and collectible to CRA for each reporting entity it administers, as required by legislation. The GST/HST collected and collectible is transferred to CRA by interdepartmental settlement in the same period as the return is filed. Monthly GST/HST returns are filed using Form GST 34, "Goods and Services Tax/Harmonized Sales Tax Return for Registrants,"
As of July 1, 2010, departments are required to file the monthly return electronically. Please refer to the CRA website for further instructions.
5.2.1 Each reporting entity must file a monthly return with CRA using the personalized GST/HST return provided by CRA. This return must be filed by the end of the month following the return's reporting period. Total revenue reported is the sum of all GST/HST revenue accounted for on the accrual basis. For months in which there are no GST, HST or adjustment amounts recorded, a NIL return must be completed and filed with CRA.
5.2.2 As an extension to the federal government entity's Business Number, each reporting entity is assigned a four-digit GST/HST account identifier number that begins with RT (e.g., RT0002, RT0003). The RT extension is the entity's own account number for GST/HST reporting purposes.
5.2.3 Basic information identifying the reporting entity is preprinted on the form supplied by CRA. The preprinted form includes the Business Number plus the RT extension number in the "Business Number" box at the top and under line 405 at the bottom of the form. The name of the reporting entity should appear in the form's "Name" box and should be the same as that shown in the space at the bottom of the GST/HST return.
5.2.4 To change the address and telephone number appearing on the preprinted form and in CRA's records, the reporting entity should complete the "Notification of Change" stub attached to the envelope that was supplied with the return and send the stub to CRA along with the monthly return. Other changes to the reporting entity, such as the addition or deletion of a reporting entity or a change to its name, must be requested using Form GST 10, "Application or Revocation of the Authorization to File Separate GST/HST Returns and Rebate Applications for Branches or Divisions."
5.2.5 Requirements for completing the monthly return differ between Government of Canada reporting entities and other registrants. In the top part of the form, government reporting entities complete only lines 101, 103, 104, 105, 107, 109 and 113C. In the bottom part, only lines 101, 105 and 109 are to be completed.
5.2.6 General instructions for completing the return are found in publications issued by CRA. In addition, the following instructions apply:
5.2.7 In addition to the monthly return, departments must send an interdepartmental settlement (IS) to CRA for each month the entity reports GST/HST collected, GST/HST collectible or both. The amount reported on the IS must be identical to the net amount recorded in the GST/HST Liability Account for the period.
5.2.8 The authorized signature is the signature of the reporting entity's designated contact person.
5.2.9 When a reporting entity has adjustments that result in a negative amount, the monthly return should show the negative amount. CRA will not issue a refund in this case, as it ordinarily would for non-government registrants. This negative amount would be carried forward as a reduction in line 104 in the next reporting period.
When a federal government department has a limit to the specific payments it can make or its total amount payable, which is established under legislation, Regulations or Treasury Board policy or as delegated by the deputy head, this limit usually includes any duties and taxes associated with the payment. The application of this general principle, however, depends on the particular wording found in the legislation, regulations or policy. Wording such as "plus applicable duties and taxes" would specifically exclude taxes and duties from the limit. In the absence of such wording, the limit is inclusive of duties and taxes.
In order to determine the level of approval authority for a project or program, the GST/HST is to be included in the total.
The total estimated cost (TEC) of a major project or program is to be calculated both with and without GST/HST. Because the total estimated amounts for a project include GST/HST, the project approval amount must correspond to this total amount. Treasury Board submissions seeking project or program approval must include GST/HST in the total.
The TEC net of GST/HST is the estimated amount that will be charged to departmental budgets and is therefore the project control amount. The TEC net of GST/HST is to be used to determine whether cost overruns have occurred and their extent.
The TEC includes the GST/HST payable or paid on imported goods when the foreign supplier is not a GST/HST registrant.
In the Directive on Delegation of Financial Authorities for Disbursements, spending authority consists of three elements: expenditure initiation authority, commitment authority and transaction authority. In all elements, the cost estimate must include all applicable GST/HST to determine the level of authority needed to approve.
The contract value, which includes the GST/HST, determines the level of authority required to approve the contract.
The level of authority required to requisition payment is inclusive of all applicable GST/HST.
When departments receive invoices for taxable supplies that do not include GST/HST, i.e., the appropriate tax has not been charged, the following circumstances will dictate the action to be taken.
6.2.1 Purchases from non-registrants are not subject to GST/HST and may be paid without tax implications. Non-registrants include small suppliers whose total revenues from taxable supplies in the four quarters preceding the present quarter do not exceed $30,000 or, in the case of public service bodies, $50,000. If the supplier claims to be a non-registrant but there is doubt concerning this status, confirmation of the status may be sought from the CRA Business and GST/HST Registration enquiries line at 1-800-959-5525. Otherwise, the invoice should be paid as presented.
6.2.2 When a contract exceeds $30,000 ($50,000 for a public service body) or there is reason to believe that the supplier is required to be a GST/HST registrant, contact the supplier and request that the invoice be amended. If the supplier refuses to comply, the invoice should be paid as presented, the case referred to the local Tax Services Office of CRA for enforcement action, and the supplier informed of the referral to CRA.
When invoices received include GST/HST but do not comply with specified invoice format requirements (see Section 7.6, "Invoice format requirements"), an amended invoice should be requested from the supplier. An invoice that follows the proper format is required for remitting the tax payable.
6.4.1 Suppliers that are GST/HST registrants are always liable for remitting payment to CRA of uncollected tax as well as applicable penalties and interest. Departments are not to engage in a dispute with the supplier over the GST/HST portion of the invoice.
6.4.2 A department may seek advice from CRA (see Section 7.4, "GST/HST rulings") to determine its responsibility for paying the GST/HST invoiced by a supplier. Even when awaiting advice or a ruling from CRA, the department must pay the amount of tax invoiced by the supplier because the Refundable Advance Account (RAA) mechanism is in place for the department to account for the tax.
6.5.1 Goods imported into Canada are generally subject to the GST/HST.
6.5.2 A foreign supplier may register for purposes of the GST/HST. If the foreign supplier is a GST/HST registrant, departments must pay the GST/HST invoiced, as long as the invoice meets format requirements. The invoice must be paid as presented. The GST/HST is then charged to the RAA in the usual manner. If there is any reason to question the legitimacy of the supplier charging GST/HST, a confirmation of the foreign supplier's registration status may be sought from the CRA Business and GST/HST Registration enquiries line at 1-800-959-5525.
6.5.3 A foreign supplier that imports taxable goods to supply a department but is not a GST/HST registrant is not entitled to claim a tax refund or rebate. The foreign supplier will include an amount to cover the GST/HST costs in the price of the goods. Departments must pay the foreign supplier the total price charged. In these cases, the GST/HST represents a cost reimbursement; therefore, it is charged to the appropriation and not the RAA.
6.5.4 Departments importing taxable goods from a GST/HST registrant must pay the applicable GST/HST at the time of importation. Accordingly, the GST/HST is paid to the Canada Border Services Agency through the Interdepartmental Settlement System. The department may charge the GST/HST to the RAA.
6.5.5 A customs broker who imports taxable goods as an agent of a federal department may pay the GST/HST on the department's behalf. The customs broker is not entitled to claim an input tax credit. The department must reimburse the customs broker for the GST/HST paid, and the applicable GST/HST may be charged to the RAA.
Departments are not subject to any of the ETA's provisions for self-assessment of GST/HST. As all tax paid by the government is covered by the Tax Remission Order, there is no loss of tax revenue when the government does not self-assess the tax.
7.1.1 As a general rule under the ETA, all goods and services provided by a supplier who is a GST/HST registrant are taxable at 5% for GST; 12% for HST in British Columbia;13% for HST in New Brunswick, Newfoundland and Labrador, and Ontario, and 15% in Nova Scotia, unless specified otherwise. Supplies to which the GST/HST does not apply are classified as zero-rated (taxable at zero %), exempt or deemed not to be a supply under the ETA.
7.1.2 When determining the application of the GST/HST, the following should also be considered:
7.2.1 When fees and rates set by Regulations are payment for a taxable supply, they are not considered to be "tax included" prices. GST is to be charged at 5% and HST is to be charged at 13% (or 12% in British Columbia, 15% in Nova Scotia).
7.2.2 Some fees and rates set by Regulations are payment for supplies that are exempt under Schedule V, Part VI of the ETA, in which case no GST/HST is to be charged.
7.3.1 Section 22 of Part VI of Schedule V of the ETA exempts a supply of a service, made by a municipality or by an organization that operates a water distribution, sewerage or drainage system and that is designated by the Minister of National Revenue to be a municipality for the purposes of this section, of installing, repairing, maintaining or interrupting the operation of a water distribution, sewerage or drainage system.
7.3.2 Section 23 of Part VI of Schedule V of the ETA exempts a supply of unbottled water (other than a zero-rated supply and a supply of water dispensed in single servings to consumers through a vending machine or at a permanent establishment of the supplier) when made by a person other than a government or by a government designated by the Minister of National Revenue to be a municipality for the purposes of this section. In addition, this section exempts the service of delivering water when the service is supplied by the supplier of the water and that supply of water is exempt.
7.3.3 Effective September 1, 1992, the federal government registrant has been designated a municipality for the purposes of sections 22 and 23 of Part VI of Schedule V of the ETA. As a designated municipality, a department that provides such supplies as described in sections 22 and 23 does not collect GST/HST on these supplies.
7.3.4 In addition, since September 1, 1992, the federal government registrant has been designated a municipality for the purposes of section 259(1) of the ETA, i.e., for the making of the supplies described in sections 22 and 23 of Part VI of Schedule V. As a result of this designation, a 100% rebate is available for the GST and the federal component of the HST paid or payable on inputs consumed, used or supplied in the course of the designated activities that involve making these exempt supplies. See the chart in Section 7.3.6 for the rebates entitled for the provincial component of the HST.
7.3.5 Therefore, municipalities, including persons designated to be municipalities under subsection 259(1) of the ETA, located outside the HST provinces of New Brunswick, Nova Scotia, Newfoundland and Labrador, Ontario and British Columbia may claim a rebate equal to 100% of the GST. Accordingly, departments located outside these HST provinces may record 100% of the GST incurred as a debit in the RAA.
7.3.6 The HST rebate available to municipalities located in Nova Scotia, New Brunswick, Newfoundland and Labrador, Ontario and British Columbia, including persons designated to be municipalities under subsection 259(1) of the ETA, is as follows:
|Federal Component of the HST (5%)||Provincial Component of the HST|
|New Brunswick (8%)||Nova Scotia (10 %)||Newfoundland and Labrador (8%)||Ontario (8%)||British Columbia (7%)|
7.3.7 When a department determines that costs for the delivery of municipal services are to be recovered from users, it may have to account for the cost of GST/HST that is not otherwise relieved in whole or in part through the municipal rebate. For example, the cost of tax should be considered when setting prices or cost recovery charges to users for municipal services in the provinces of:
7.3.8 Some departments that provide the supplies described in sections 22 and 23 of Part VI of Schedule V of the ETA do not account for the costs of making such supplies separately from the other costs of their operations. It is therefore difficult to claim the municipal rebate at the time the inputs are paid for. To avoid departments having to establish costly supplementary processes for separating GST/HST on inputs for these exempt supplies, officials at CRA and the Department of Finance have proposed an alternative.
Method 1: At the time when the GST/HST is paid, record the percentage of municipal rebate available (see chart in Section 7.3.6) as a debit in the RAA and the balance to the chargeable appropriation.
Method 2: At the time when the GST/HST is paid, record the total GST/HST paid as a debit in the RAA. Following the procedure outlined below, departments are required to make an annual adjustment entry.
7.4.1 For questions on the application of GST/HST to a government program or a specific transaction, please refer to Section 10, "Enquiries," of the Directive.
7.4.2 To avoid any possible misinterpretation of the ETA, departments may, through or with the consent of their GST/HST Coordinator, request an official written ruling or interpretation from the CRA Tax Services Office when the GST/HST status of a transaction is in doubt.
7.4.3 Departments may request a written ruling or an interpretation of the law from CRA. CRA rulings are specific to a particular registrant or other person's clearly defined factual situation, are issued only when all relevant facts are provided, and are binding on the CRA. An interpretation is a general written explanation of how the law will apply. A GST/HST interpretation may apply to departmental programs as a whole but does not bind CRA or absolve departments from GST/HST liabilities if they incorrectly apply CRA's interpretation or opinion to a specific transaction.
7.5.1 Some employee benefits are subject to GST/HST. The ETA and the Income Tax Act are the sources for determining which benefits and benefit amounts are subject to GST/HST. HST applies to the employee benefit when the location of employment is in New Brunswick, Nova Scotia, Newfoundland and Labrador, Ontario or British Columbia.
7.5.2 Generally, an employee benefit is subject to GST/HST when the benefit results from the supply of a good or service (other than an exempt or zero-rated supply) and is included in the calculation of an employee's income, according to paragraph 6(1)(a), (e), (k) or (l) of the Income Tax Act. Therefore, the whole amount received, including GST/HST, is included in the employee's income as a taxable benefit.
7.5.3 When a department pays a supplier for goods or services used to provide a taxable benefit to an employee, any GST/HST included in the payment may be recorded as a debit in the RAA. When the taxable benefit is included in the employee's income for the year, the GST/HST that the department paid, or that is payable for the property or services used to provide the benefit, must be added to the amount of the benefit. In effect, the employee "pays" the GST/HST on the benefit and the department "collects" it. Technically, the department is considered to have collected GST/HST from the employee, and the GST/HST is considered to have been paid by the employee on goods and services received from the department as a private individual.
7.5.4 Ordinarily, under section 173 of the ETA, when a GST/HST registrant provides a taxable supply to an employee that results in a taxable benefit to the employee, the registrant is required to remit tax on that benefit, although no tax is actually collected from the employee. This rule does not apply to government departments, and departments do not remit the tax on taxable benefits. However, departments must determine the appropriate amount of GST/HST to be included in calculating an employee's taxable income.
7.5.5 Supplies to Indians and Indian bands
7.5.6 Supplies to provincial government entities
7.6.1 The Government of Canada's Business Number for GST/HST purposes is 121491807RT0001. This number must be shown on invoices or receipts for goods and services supplied by departments. Departments that have separate reporting entities, established under subsection 239(1) of the ETA, and have been assigned unique GST/HST account identifier extensions (i.e., RTXXXX) may use their respective RT extensions on invoices and receipts instead of the federal government entity's RT0001 extension.
7.6.2 The legislation permits the GST/HST to be recorded in one of two ways: included in the price of the supply or shown as a separate line item. To facilitate billing, price adjustments and the purchaser's claim for input tax credits and to accommodate GST/HST rate changes, departments are encouraged to show the GST/HST on a separate line.
7.6.3 In general, invoice requirements under GST/HST legislation follow normal business practice, with the addition of information specific to the GST/HST charged and the Business Number. Invoices are also understood to mean "receipts" for cash sales when no invoice is issued. The disclosure requirements for invoices are as follows:
For invoice amounts under $30:
For invoice amounts between $30 and $150:
For invoice amounts of $150 or more:
When a purchaser of government goods and services refuses to pay the GST/HST on cash sales, the goods and services should not be provided. When a purchaser refuses to pay the GST/HST on a credit sale, the tax must be set up as an account receivable and appropriate collection action taken. The department must remit the GST/HST collectible to CRA, whether or not the purchaser pays the tax.
8.1 Transfer payments are monetary payments made by the federal government to a recipient (grantee) from an appropriation provided to further a government policy objective. Generally, the transfer payment does not result in the federal government receiving a supply of any property or services. Transfer payments are grants, conditional grants, contributions, repayable contributions, assessed contributions to international organizations and transfers to other levels of government. Transfer payments do not include loans, loan guarantees or investments.
8.2 As set out in CRA Technical Information Bulletin B-067, Good and Services Tax Treatment of Grants and Subsidies, transfer payments made for a public purpose that result in no supply made by the grantee to either the grantor or a specified third party are not treated as payment for a supply and are therefore not subject to GST/HST.
8.3 CRA's policy applies to payments made by both public and private sector organizations.
8.4 The term "transfer payment" is frequently used by the federal, provincial and territorial governments, though each may have its own description of what constitutes a transfer payment.
8.5 A transfer payment made by a government may fall squarely within Treasury Board's definition of a transfer payment, yet still be subject to GST/HST. Transfer payments that are made to benefit specific, named parties or those for which the government requires more accountability than that provided under CRA Technical Information Bulletin B-067, Good and Services Tax Treatment of Grants and Subsidies, may be subject to GST/HST. When in doubt as to whether GST/HST applies to a specific transfer payment, departments must request a GST/HST ruling from CRA. Even if awaiting a CRA ruling, the department must pay the amount of tax invoiced by the recipient because the RAA mechanism is in place for the department to account for the tax.
9.1.1 All GST/HST charged by departments to their customers is to be recorded on an accrual basis in the GST/HST Liability Account, financial reporting account 21134, until the amounts are transferred to CRA.
9.1.2 Accounting entries-Provision of taxable supplies
9.1.3 Accounting entries-Purchase of taxable supplies
9.1.4 Charges to the RAA
Only GST/HST payments that are relieved of tax pursuant to the Tax Remission Order may be charged to a department's RAA. Generally, there are three classes of GST/HST payments that may be charged to the RAA:
9.1.5 Specified purpose accounts-GST liability
GST/HST must be paid and accounted for appropriately when taxable supplies are purchased using specified purpose account (SPA) funds. Please consult the Directive on Specified Purpose Accounts. In the majority of cost-sharing and joint project agreements, it is required that GST/HST on the purchase of taxable supplies made with SPA funds be charged to the SPA and not the RAA.
Exceptions to charging GST/HST to the SPA:
9.1.6 GST/HST paid in error
When tax has been paid in error on a purchase made by a government department,
claims for this tax should not be filed because the GST/HST paid has been charged to the department's RAA.
9.1.7 Discounts and interest
9.1.8 Penalty and interest
If a department fails to comply with the ETA, it will not be required to pay a penalty or interest. However, departments must avoid situations in which penalty and interest charges would normally have applied.
9.1.9 Audit trail and supporting documentation
9.1.10 Current year refunds of expenditures
Departments that return goods to suppliers are responsible for matching refunds back to the original GST/HST charges and for making the necessary credit entries to the RAA.
9.1.11 Refunds of prior year's expenditures after closing the year
For refunds of previous year's expenditures after the year has been closed, the portion representing the actual cost of the goods or services must be coded against "Refunds of Previous Year's Expenditures." Any GST/HST refunded must be credited to the RAA of the current year.