Directive on the Application of the Goods and Services Tax/Harmonized Sales Tax

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1. Effective date

1.1 This directive took effect on July 1, 2010 and is amended effective April 1, 2013.

1.2 It replaced the following:

  • Policy on the Application of the Goods and Services Tax and the Harmonized Sales Tax in the Departments and Agencies of the Government of Canada – For FIS Compliant Departments and Agencies (dated March 1, 2000); and
  • Policy Notice - Reduction in the Rate of the GST/HST - (dated June 13, 2006 and December 21, 2007).

2. Application

2.1 This directive applies to departments as defined in section 2 of the Financial Administration Act.

2.2 Those portions of this directive that provide for the Comptroller General to monitor compliance with this directive within departments and request departments to take corrective action, do not apply with respect to the Office of the Auditor General, the Office of the Privacy Commissioner, the Office of the Information Commissioner, the Office of the Chief Electoral Officer, the Office of the Commissioner of Lobbying, the Office of the Commissioner of Official Languages, and the Office of the Public Sector Integrity Commissioner. The deputy heads of these organizations are responsible for monitoring and ensuring compliance with this directive within their organizations, as well as for responding to cases of non-compliance in accordance with any Treasury Board instruments that address the management of compliance.

3. Context

3.1 This directive supports the Policy on Internal Control by outlining the roles and responsibilities of chief financial officers and departmental managers in charging, collecting, remitting and paying the Goods and Services Tax (GST) and the Harmonized Sales Tax (HST) where applicable. This directive establishes a consistent approach that ensures that departments charge and collect GST or HST on their taxable supplies of property or services and pay GST or HST on their taxable purchases as required by the relevant legislation.

3.2 The Government of Canada must comply with Part IX of the Excise Tax Act and its related schedules and regulations. The purpose of this directive is to ensure the proper application of Part IX of the Excise Tax Act and its related schedules and regulations by federal government departments with respect to the GST/HST.

3.3 In 1997, the Excise Tax Act was amended to implement the HST. The HST is a single harmonized value-added tax that replaces the provincial retail sales taxes and the federal GST in certain provinces. To participate in the HST, each of these "participating provinces" signed a Comprehensive Integrated Tax Coordination Agreement (CITCA) with the federal government.

3.4 Government departments must also comply with the provisions of Part 4 "First Nations' Sales Tax" of the Budget Implementation Act, 2000, and the First Nations Goods and Services Tax Act (PDF – 322 KB) because some First Nations levy a sales tax that is fully harmonized with the GST. This directive applies to the First Nations' taxes that are levied to comply with these two statutes.

3.5 The federal government entity, comprised of all departments, is registered for GST/HST purposes with the Canada Revenue Agency (CRA) as one registrant under Business Number 121491807 with a unique RT (i.e. a program identifier used by CRA to represent the GST/HST account) extension for each reporting entity. Interdepartmental transactions are, therefore, not considered to be supplies and are not subject to GST/HST. Each department that provides taxable property or services is responsible for requesting a GST/HST specific account from CRA that is identified by an RT extension plus four digits.

3.6 Subsection 239(1) of the Excise Tax Act provides the basis for a department to file a separate GST/HST monthly return, if necessary.

3.7 Deputy heads of departments have the authority to add, delete from or make any other amendments to the registration of Government of Canada reporting entities for the purposes of subsection 239(1) of the Excise Tax Act.

3.8 The GST Federal Government Departments Tax Remission Order, P.C. 1990-2854 ensures that departmental appropriations are not impacted by the Crown obligations enacted by the Excise Tax Act. The Tax Remission Order provides for remission of the tax that is paid or payable by a department under Part IX of the Excise Tax Act. Therefore, departments are required to establish a GST Refundable Advance Account (GST RAA) as an asset financial reporting account to record the GST and the HST paid or payable on its purchases. To properly account for the offset in the financial statements and public accounts, two reporting methods are used as follows:

  • Month-end accounting entries are completed monthly by the CRA to offset the GST Refundable Advance Account departmental balances against GST/HST revenues; and
  • At year-end, the actual GST Refundable Advance Account departmental balances are cleared and the amounts are transferred to the CRA by interdepartmental settlements.

3.9 Part III.1 of the Federal-Provincial Fiscal Arrangements Act provides for the Government of Canada to enter into sales tax harmonization agreements, including CITCAs, with a Government of a province that agrees to replace its provincial retail sales tax (and the federal GST) with the HST levied under Part IX of the Excise Tax Act.

3.10 Under Part IX "Goods and Services Tax" of the Excise Tax Act:

  • Subsection 165(1) provides that "every recipient of a taxable supply made in Canada shall pay to Her Majesty in right of Canada tax in respect of the supply..."
  • Subsection 165(2) provides that "every recipient of a taxable supply made in a participating province shall pay to Her Majesty in right of Canada, in addition to the tax imposed under subsection (1), tax in respect of the supply calculated at the rate for that province..."
  • Section 122 provides that Part IX of the Excise Tax Act is applicable to the federal Crown, including the obligation to pay GST/HST under section 165 and all obligations as a supplier; and
  • Subsection 221(1) states that the GST/HST is to be collected by the supplier and that the supplier acts as an agent of the Crown in collecting the GST/HST payable in respect of the supply.

3.11 This directive is issued pursuant to section 7 of the Financial Administration Act.

3.12 This directive is to be read in conjunction with the Policy on Internal Control. Additional information on how to apply the requirements of this directive is provided in the Guideline on the Application of Goods and Services Tax/Harmonized Sales Tax.

4. Definitions

Definitions to be used in the interpretation of this directive can be found in Appendix A.

5. Directive statement

5.1 Objective

The objective of this directive is to ensure the effective and efficient processing of the GST/HST by all federal government departments.

5.2 Expected results

  • The GST/HST is paid on purchases when applicable.
  • The GST/HST is charged, collected and remitted on taxable supplies when applicable.

6. Requirements

6.1 The Chief Financial Officer is responsible for establishing management practices and controls to ensure:

  • 6.1.1 Identification of a departmental GST/HST coordinator.
  • 6.1.2 Separate records and accounts are maintained for each reporting entity (as per the requirements of subsection 239(2) of the Excise Tax Act) when separate GST/HST reporting entities for their department or the organizational units within their department are established with CRA;
  • 6.1.3 Periodic reviews are carried out to determine whether the GST/HST has been completely and accurately charged; and
  • 6.1.4 Departmental managers are made aware of their responsibilities in this context.

6.2 Payment of GST/HST when the department is a purchaser

Departmental managers who have been assigned responsibility for managing an activity that includes the procurement of taxable property and services are responsible for:

  • 6.2.1 Complying with the GST/HST provisions in the Excise Tax Act and paying the GST/HST when acquiring or importing taxable property or services;
  • 6.2.2 Ensuring that taxes imposed by First Nations that replace the GST are paid when acquiring property or services on the lands where these taxes apply. Note that the CRA’s First Nations Goods and Services Tax (FNGST) and First Nations Tax (FNT) apply;
  • 6.2.3 Not paying the GST/HST on interdepartmental transactions; and
  • 6.2.4 Recording the GST/HST payable on purchases, including purchases made on behalf of other departments in the GST Refundable Advance Account.

6.3 Collection and Remittance of GST/HST when the department is a vendor

Departmental managers who have been assigned responsibility for managing an activity that includes the sale of taxable property and services are responsible for:

  • 6.3.1 Charging, collecting and remitting the GST/HST on the provision of taxable supplies;
  • 6.3.2 Ensuring that taxes imposed by First Nations that replace the GST are collected and remitted when selling property or services on the lands where these taxes apply. Note that CRA’s First Nations Goods and Services Tax (FNGST) and First Nations Tax (FNT) apply;
  • 6.3.3 Ensuring that the GST/HST is not charged on interdepartmental transactions; and
  • 6.3.4 Recognizing and recording collected and collectible GST/HST in a liability account on an accrual basis. Note that Financial Information Strategy Accounting Manual, section 9.3 "Sales Tax" applies.

6.4 Accounting of GST/HST

Departmental managers who have been assigned responsibility for monthly and year-end accounting are responsible for transferring at month-end and year-end, the amount in the GST Refundable Advance Account to CRA. The CRA then authorizes the department of Public Works and Government Services Canada to deduct these amounts from the general GST/HST tax revenue accounts pursuant to the Tax Remission Order. Note that Chapter 14, Appendix 10, of the Receiver General Manual applies.

6.5 Transfer Payments

Departmental managers who have been assigned responsibilities for managing transfer payment programs and transfer payments are responsible for specific requirements when transfer payments are subject to the GST/HST. Note that where there are questions relating to the application of GST/HST to transfer payments, GST/HST Technical Information Bulletin B-067: "Goods and Services Tax Treatment of Grants and Subsidies" should be consulted.

6.6 Monitoring and reporting requirements

  • 6.6.1 Chief financial officers are responsible for supporting their deputy head by overseeing the implementation and monitoring of this directive in their departments, bringing to the deputy head’s attention any significant difficulties, gaps in performance or compliance issues and developing proposals to address them, and reporting significant performance or compliance issues to the Office of the Comptroller General of Canada.
  • 6.6.2 The Comptroller General of Canada is responsible for monitoring departments’ compliance with the requirements of this directive and in conjunction with its related policy, conducting a review within five years.
  • 6.6.3 Note that federal and provincial tax auditors may monitor and audit adherence to this directive, federal and provincial tax legislation, and federal/provincial tax agreements.

7. Consequences

7.1 In instances of non-compliance, deputy heads are responsible for taking corrective measures within their organization with those responsible for implementing the requirements of this directive.

7.2 In support of the responsibility of deputy heads to implement the Policy on Internal Control and related instruments, chief financial officers ensure corrective actions are taken to address instances of non-compliance with the requirements of this directive. Corrective actions can include requiring additional training, changes to procedures and systems, the suspension or removal of delegated authority, disciplinary action, and any combination of these measures.

7.3 For a range of consequences for non-compliance with this Directive, refer to the Framework for the Management of Compliance.

7.4 Individuals are reminded that sections 76 to 81 (Civil Liabilities and Offences) of the Financial Administration Act as well as sections 121 (Frauds against the Government), 122 (Breach of Trust), 322 (Theft) and 380 (Fraud) of the Criminal Code may apply.

7.5 Organizations and individuals may be subject to consequences as set out in federal and provincial tax legislation and federal/provincial tax agreements.

8. Roles and responsibilities of government organizations

This section identifies other significant departments with respect to this directive. In and of itself, it does not confer an authority.

8.1 The Canada Border Services Agency (CBSA) is responsible for:

  • Charging and collecting the GST/HST on goods imported into Canada; and
  • Responding to enquiries from departments concerning interdepartmental settlements for paying assessed duties and the GST/HST on goods imported into Canada.

8.2 The Canada Revenue Agency (CRA) is responsible for:

  • Preparing and issuing technical information on the interpretation of the Excise Tax Act;
    • Responding to enquiries from departmental GST/HST coordinators concerning the technical aspects of the GST/HST, GST/HST registration or a specific GST/HST return;
    • Issuing a GST/HST ruling when a formal request has been made; and
    • Authorizing the remission of the GST/HST pursuant to the Tax Remission Order.

8.3 Federal, provincial and territorial tax auditors are responsible for reviewing books and records to see if taxes have been properly charged, collected, remitted and paid.

8.4 The department of Public Works and Government Services Canada (PWGSC) is responsible for issuing Chapter 14 "Year End Timetables and Procedures" of the Receiver General Manual.

8.5 The Treasury Board Secretariat (Office of the Comptroller General) is responsible for development, oversight and maintenance of this directive and for providing interpretation advice.

9. References

9.1 Other relevant legislation and regulations

9.2 Related policy instruments and publications

10. Enquiries

10.1 Please direct enquiries about this directive to your departmental headquarters or departmental GST/HST Coordinator. For interpretation of this directive, departmental headquarters or departmental GST/HST Coordinators should contact:

Financial Management Policy Division
Financial Management Sector
Office of the Comptroller General
Treasury Board Secretariat
Ottawa ON K1A 0R5

E-mail address: fin-www@tbs-sct.gc.ca
Telephone: 613-957-7233
Fax: 613-952-9613

10.2 Enquiries from the departmental GST/HST Coordinators to Canada Revenue Agency may be directed as follows:

For general enquiries concerning the GST/HST:

  • For service in English, telephone 1-800-959-5525; and
  • For service in French, telephone: 1-800-959-7775

For enquiries concerning technical aspects of the GST/HST, contact the 1-800 numbers provided below:

  • For service in English, telephone: 1-800-959-8287; and
  • For service in French, telephone: 1-800-959-8296

For GST/HST in the province of Quebec,

  • For service in English, telephone: 1-877-960-9102 and;
  • For service in French, telephone: 1-877-960-9101

To make a formal request for a GST/HST ruling:

For these departments located outside the province of Quebec, please write to Legislative Policy and Regulatory Affairs (LPRA) - GST/HST Ruling Centres close to your location:

  • Atlantic Region
    • LPRA Division – GST/HST Rulings
      1557 Hollis Street
      P.O. Box 638
      Halifax NS B3J 2T5
      Fax: 902-426-3062
  • Ontario Region
    • LPRA Division – GST/HST Rulings
      55 Bay Street North
      P.O. Box 2220
      Hamilton ON L8N 3E1
      Fax: 905-527-0790
    • LPRA Division – GST/HST Rulings
      3rd Floor East
      1 Front Street West
      Toronto ON M5J 2X6
      Fax: 416-952-5031
    • LPRA Division – GST/HST Rulings
      4th Floor
      333 Laurier Avenue West
      Ottawa ON K1A 0L9
      Fax: 613-957-8481
  • Prairie Region
    • LPRA Division – GST/HST Rulings
      325 Broadway Avenue
      Winnipeg MB R3C 4T4
      Fax: 204-984-0606
    • LPRA Division – GST/HST Rulings
      340 3rd Avenue North
      Saskatoon SK S7K 0A8
      Fax: 306-975-4418
    • LPRA Division – GST/HST Rulings
      220 4th Avenue S.E.
      Calgary AB T2G 0L1
      Fax: 403-292-5636
    • LPRA Division – GST/HST Rulings
      9700 Jasper Avenue
      Edmonton AB T5J 4C8
      Fax: 780-495-7527
  • Pacific Region
    • LPRA Division – GST/HST Rulings
      200-1010SM
      9755 King George Boulevard
      Surrey BC
      V3T 5E1
      Fax: 604-658-8666

For these departments located in the province of Quebec, please write to:

  • GST/HST Rulings
    320 Queen St
    15th Floor, Tower "A"
    Place de Ville
    Ottawa, Ontario K1A 0L5

For enquiries concerning GST/HST registration, contact:

Team Leader, Client Services
Kingston Tax Services Office
Canada Revenue Agency
Kingston ON K7L 5P3

Telephone: 1-613-541-3609
Fax: 1-613-545-3272

For enquiries concerning a specific GST/HST return or the status of the department's GST/HST account, contact:

GST Trust Compliance
Revenue Collections
Ottawa Tax Services Office
Canada Revenue Agency
Ottawa ON K1A 0L9

TTY: 1-800-665-0354

To send a copy by fax, or to enquire about the department's Interdepartmental Settlement (IS) Return Notification File for the GST/HST, contact:

The Shawinigan-Sud Tax Centre
General Ledger Section 534-3-1

Fax: 1-819-536-7078

10.3 Departments enquiries to the Canada Border Services Agency concerning interdepartmental settlements related to payment of duties and taxes on goods imported into Canada by the department may be addressed to:

Canada Border Services Agency
Northern Ontario Region
Ottawa ON K1G 6C4

Telephone: 1-613-990-6910
Fax: 1-613-991-6898


Appendix A – Definitions

Note: Readers should also be aware of and consult the definitions under Part IX of the Excise Tax Act.

Federal government registrant (Inscrit gouvernemental fédéral)

Is a single entity registered with the Canada Revenue Agency for GST/HST purposes under the name "Government of Canada," and includes all departments. The federal government registrant has been assigned the Business Number (BN) 121491807RT0001.

Foreign supplier (Fournisseur étranger)

Is a non-resident supplier of property or services.

GST/HST (TPS/TVH)

Is the federal tax imposed under Part IX of the Excise Tax Act. The GST/HST applies on most taxable supplies in Canada.

GST Refundable Advance Account (GST RAA) (Compte des avances remboursables de la TPS [CAR TPS])

Is an asset financial reporting account in which amounts paid or payable for the GST/HST on purchases from external entities are recorded.

Harmonized Sales Tax (HST) (taxe de vente harmonisée [TVH])

Is the single harmonized value-added tax made up of a federal part and a provincial part that applies on taxable supplies made in the participating provinces. It is applied at a single rate on the same basis as the GST.

Management practices and controls (pratiques et contrôles de gestion)

Are all policies, processes, procedures and systems that enable a department to operate its programs and activities, use its resources efficiently and effectively, exercise sound stewardship, fulfill its obligations and achieve its objectives.

Participating provinces (provinces participantes)

Are the provinces of New Brunswick, Nova Scotia and Newfoundland and Labrador, Ontario, Prince Edward Island (effective April 1, 2013) and other provinces that may enter a sales tax harmonization agreement and are listed in Schedule VIII of the Excise Tax Act. Participating provinces have a Harmonized Sales Tax (HST) mechanism in place. Quebec is not a participating province. British Columbia is no longer a participating province effective April 1, 2013.

Periodic (Périodique)

Is an interval of time determined to be reasonable by a Chief Financial Officer based on risk and on the particular departmental circumstances (e.g., volume of transactions, automation of systems, size and structure of organization).

Province/provincial (Province/provincial)

Refers to a province or territory of Canada.

Public service body (Organisme de services publics)

Can be a charity, non-profit organization, municipality, school authority, hospital authority, public college or university.

Reporting entity (Entité de déclaration)

Is a department, or part of a department that files a separate GST/HST return with the Canada Revenue Agency.

Supply (Offre)

Is any provision of property or service and includes sale, transfer, barter, exchange, licence, rental, lease, gift and disposition.

Tax Remission Order (Décret de remise d'impôt)

Is the GST Federal Government Departments Remission Order, which relieves the GST/HST that is paid or payable by a department. This relief is effected through the use of the Refundable Advance Account.

Taxable supply (Fourniture taxable)

Is a supply of a property or a service other than an exempt supply.