Alert: Businesses Must Remit GST/HST From Own Pocket Even If Not Paid By Customer/Client
A GST/HST registered supplier must submit its GST/HST returns on time (either monthly, quarterly or annually) and remit (that is pay to the Receiver General) all GST/HST charged on invoices issued during the period for the GST/HST return. If an invoice has not been paid by the customer/client, the GST/HST must be remitted. This means that the supplier must take the money from his/her own pocket or even draw on a line of credit. The Canada Revenue Agency will assess the supplier interest and penalties if the GST/HST is not remitted.
All that being said, the supplier may claim its input tax credits to minimize the impact of the rule. The net tax calculation may soften the effect of the rule - but it remains that the supplier is on the hook for the GST/HST.
Businesses may have to wait a long time to be paid by their customer/client and are out-of-pocket the GST/HST for some time depending on the situation. The CRA auditors with whom I have spoken are not sympathetic to the supplier. On the contrary, suppliers are more often viewed critically and as potential thieves of the government's money. This is unfair.
Cyndee Todgham Cherniak is counsel to and in affiliation with the International Trade Law and the Tax Law (Commodity Tax
