Retroactive GST/HST Reassessments in New Legislative Proposals: The Excise Tax Act

The Tax Court of Canada recently provided a favorable ruling in a case that allowed a business to claim input tax credits for amounts of GST already recovered from suppliers through credit notes.

In response, on January 17, the Department of Finance released proposed amendments to the Excise Tax Act to ensure this doesn’t happen again.

The amendments reaffirm that a taxpayer cannot claim input tax credits in respect of an amount of tax that has already been recovered from a supplier.

These amendments are to have retroactive effect; that is, they are deemed to have come into force the day the original provisions were enacted, being April 23, 1996. However, cases already decided in the courts under the old rules would not be reconsidered, according to Finance Canada.

The following sections of the Act are affected in the proposed amendments:

- 178.8(7)(c)(ii)

- 180.01

- Subsection 225(3.1)

- Subsection 225.1(4.1)

Comments can be sent to consultitccti@fin.gc.ca or to:

Tax Policy Branch
Department of Finance
140 O’Connor Street
Ottawa, Ontario
K1A 0G5