Input Tax Credit Reporting 101
Many businesses are conducting tests to determine whether they are recording their input tax credits properly. In particular, they are verifying that when they pay harmonized sales tax (HST), the HST is recorded properly in their computerize records so that when they file their first GST/HST return for the reporting period that includes July 1, 2010, they include the HST paid on purchased supplies.
When a business files a GST/HST return, they should include in the input tax credit line all GST and HST paid or payable. Even though some input tax credits of large businesses are subject to recaptured ITC rules (which will not be addressed in this post), they must claim the full amount in the ITC line and NOT undertake an offset calculation. For the purposes of the example below, I am assuming the business is located in Ontario:
| Type of Supply | Value of the Supply | GST Paid or Payable | HST Paid of Payable | Total ITC |
| real property rent | $10,000 | $500 | $800 | $1,300 |
| legal services | $20,000 | $1000 | $1,600 | $2,600 |
| telecommunications | $500 | $25 | $40 | $65 |
| computers | $10,000 | $500 | $800 | $1,300 |
| energy | $1,000 | $50 | $80 | $130 |
| vehicle | $50,000 | $2,500 | $4,000 | $6,500 |
While there would be many other entries in a typical business, in the above example, the ITC to be claimed is $11,895. As previously mentioned, if the business is subject to the recaptured ITC rules, that calculation does not affect the ITCs claim line and is addressed/calculated elsewhere.
A GST/HST registrant has a prescribed period of time (often 4 years) in which to claim input tax credits.
Cyndee Todgham Cherniak is counsel to and in affiliation with the International Trade Law and the Tax Law (Commodity Tax
