If GST/HST Registrant Buys Real Property, The Registrant Should Not Pay GST/HST to Vendor
I was recently called by a person who purchased a hotel property from a vendor. The buyer paid GST/HST to the vendor. The Canada Revenue Agency (CRA) has denied the input tax credit on the basis that GST/HST was not payable and, therefore, the GST/HST was paid in error. The CRA has said that since the error was not discovered until after 2 years after the payment, they will not give a refund of tax paid in error. This real property is used in commercial activities and the Government of Canada gets its GST/HST on accommodations, food sales, etc.
Here is the starting point of the analysis - Subsection 221(1) of the Excise Tax Act provides that every person who makes a taxable supply in Canada must collect GST/HST payable by the recipient in respect of the supply. BUT, paragraph 221(2) of the Excise Tax Act sets out important relief:
"A supplier (other than a prescribed supplier) who makes a taxable supply of real property by way of sale is not required to collect tax under Division II payable by the recipient in respect of the supply where ... (b) the recipient is registered [for GST/HST purposes] and, in the case of a recipient who is an individual, the property is neither a residential complex nor supplied as a cemetery plot or place of burial, entombment or deposit of human remains or ashes."
What means that the supplier is not required to collect GST/HST when the buyer is registered for GST/HST purposes and purchases certain real property.
This blog post to is intended to help buyers not get themselves into the same mess.
The problem faced by this person should be fixed. Since solutions are unique, you will have to continue to read The HST Blog to learn how. When I hear of unfairness like this, I am inspired to help.
Cyndee Todgham Cherniak is counsel to and in affiliation with the International Trade Law and the Tax Law (Commodity Tax
Hi I am going through a scenario very similar to the one described above. I bought a property in May 2008 and unknowingly paid the vendor GST when I was a GST registrant. Now CRA is denying me my ITC b/c I have passed the "2 year timeline to get my GST paid in error." My GST deadline for the year is always the following March deadline so since this transaction occured in MAY 2008 that means I would have had from March 2009- March 2011 to claim any ITC. I filed for this ITC in November of 2010. They still deny me b/c the middleman (vendor) rec'd my GST and remitted instead of it going straight from me to CRA. Pure technicality.
I can't beleive this is the way they treat tax paying citizens